Workers’ rights are humongous. It has evolved over centuries through several socialistic movements and industrial revolutions from 18th Century globally. In India, during the pre-independance era the Colonial British rule did not have notable labor laws except a few labor legislation such as the Trade Unions Act, The Payment of Wages Act, The Employees Compensation Act etc. Post independence, India seeded the industrial jurisprudence reinforced by several touchstone labor legislation such as the Industrial Disputes Act, Minimum Wages Act, Factories Act, Plantation Labour Act, Mines Act, Employees’ Provident Funds and Miscellaneous Provisions Act, Employees State Insurance Act and many more.
Position of Employment / Labor Laws
The employment / labor laws are principally regulated by the provisions of Industrial Disputes Act, 1947 (“ID Act”), The Industrial Employment (Standing Orders) Act, 1946 and The Shops and Establishment Act (“SE Act”), the Factories Act and another forty laws and the rules framed thereunder.
The ID Act defines as to what constitutes an Industry, who is an employer, who is a workman, what is an industrial dispute, how the disputes should be adjudicated, which are the adjudicatory authorities, under what circumstances and how an employer can lay off or retrench the workmen, how the workmen can call for a strike, when and how an employer can close the business etc.
The SE Act of every State defines the Employer, Shop, Commercial Establishment, Worker, Employee and stipulates the employment, working hours, rest intervals, leave norms, payment of wages, termination of services of employees etc.
The ID Act and SE Act play pivotal role regulating the employer and workmen / employee relationship which ultimately hinges the national economy and employment.
Impact of COVID-19 on the rights of the Workers
The unforeseen outbreak of COVID-19 caused the Government to initiate several measures to prevent, control and mitigate the pandemic by invoking the provisions of the Disaster Management Act, 2005 (“DM Act”) and the Epidemic Act, 1897. Pursuant to the situation and under the provisions of the DM Act, the Ministry of Home Affairs (“MHA”) issued an order dated 29-03-2020 wherein it directed the employers be it an industry or shop or establishment, to pay the 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.
Pursuant to this MHA order, many of the State Governments issued orders and directions expanding the applicability to the workers and employees of public and private establishments.
Here comes the interpretation
When the MHA order expressly states as ‘be it an industry or any under the shop and establishment’ the term ‘payment of wages’ has to be read for the ‘workers / employees’ as defined under the ID Act as well the SE Act in broader perspective beneficially with rational nexus keeping the key objectives of legislating the employment laws.
As per the SE Act, an “Establishment”, means “a shop, restaurant, eating house, residential hotel, lodging house, theatre or any place of public amusement or entertainment and includes a commercial establishment and such other establishment as the Government may, by notification, declare to be an establishment for the purpose of this Act.”
The Act further defines a “Commercial Establishment” as “an establishment which carries on any trade, business, profession or any work in connection with or incidental or ancillary to any such trade, business or profession or which is a clerical department of a factory or an industrial undertaking or which is a commercial or trading or banking or insurance establishment and includes an establishment under the management and control of a co-operative society, an establishment of a factory or an industrial undertaking which falls outside the scope of the Factories Act, 1948, (Central Act 63 of 1948), and such other establishment as the Government may, by notification declare to be a commercial establishment for the purposes of this Act but does not include a shop”.
Now, who are the workers?
In light of the MHA Order, it is necessary to understand the definitions of “employees” and “workers” to whom the said Order shall apply.
The ID Act defines a “workman” as “any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person (i) who is subject to the Air Force Act, 1950 (45 of 1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or (ii) who is employed in the police service or as an officer or other employee of a prison; or (iii) who is employed mainly in a managerial or administrative capacity; or (iv) who, being employed in a supervisory capacity, draws wages exceeding ten thousand rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.”
The Factories Act, defines “Worker” as “a person [employed, directly or by or through any agency (including a contractor) with or without the knowledge of the principal employer, whether for remuneration or not], in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with, the manufacturing process, or the subject of the manufacturing process but does not include any member of the armed forces of the Union.”
The SE Act defines “Employee”, as “a person wholly or principally employed in, and in connection with, any establishment and includes an apprentice and any clerical or other staff of a factory or industrial establishment who fall outside the scope of the Factories Act, 1948; (Central Act, 63 of 1948) but does not include the husband, wife, son, daughter, father, mother, brother or sister of an employer or his partner, who is living with and depending upon such employer or partner and is not in receipt of any wages.”
In the present scenario, certain employees who are in the ambit of managerial, administrative functions fall within the purview of exemptions provided under the SE Act, ID Act and Factories Act. Moreover, the majority of workforce in the Industries, Factories, Commercial Establishments do not fall within the defined parameters of “Employee” or “Worker” under these Acts respectively.
Therefore, the MHA Order will not be applicable to such exempted employees and workers.
Then what governs the relationship of employers with such exempted employees and workers?
The letter of appointment / employment, agreement, contract executed between the employer and such employees / workers governs the terms between them.
Think Tank Exercise
How many employers would have clauses addressing such a situation in the employment agreement? If so, is an employee / worker willing to accept those clauses? What will be the mechanism likely to be adopted by the employers going forward on this aspect? Will the Legislators revisit the provisions of employment / labor laws to realign keeping pace with the industrial dynamism?
Legal position of the Disaster Management Act (“DM Act”)
The employer and employee / worker relationship is generally governed by the provisions of aforesaid Acts and other labor laws.
Due to the outbreak of COVID-19, the pandemic created a compelling situation to the Government to invoke the provisions of the DM Act to ascertain efficacious lockdown as a regulating measure.
Section 2(d) defines the word “Disaster” as “catastrophe, mishap, calamity or grave occurrence in any area, arising from natural or man-made causes, or by accident or negligence which results in substantial loss of life or human suffering or damage to, and destruction of, property, or damage to, or degradation of, environment, and is of such a nature or magnitude as to be beyond the coping capacity of the community of the affected area”.
The term “Disaster” contemplates wider scope interpreting the “grave occurrence in any area from natural or man-made causes” which does not limit to substantial loss of life or human suffering but also the magnitude which are beyond the coping capacity of the community of the affected area. Considering the impact of Covid-19 pandemic, it is evident that not only it leads to the risk of loss of lives, but also may result in human sufferings in ways beyond coping capacity due to the impact on economy and health of people and the nation.
The DM Act, by virtue of Section 72, supersede all the prevailing labor and employment laws. Section 58 of the Act empowers the authorities to convict and punish the Companies with imprisonment or fine or both for any act or omission that is in contravention of this Act.
Supreme Court on the MHA Order
Several employers, especially the Micro, Small, Medium Enterprises (“MSME”) approached the Supreme Court seeking relief against the aforesaid MHA Order pleading the survival and sustainability due to COVID-19 lockdown. The Apex Court granted an interim relief to the employers by staying the operation of MHA Order directing the authorities not to prosecute the employers for non-payment of full wages during the lockdown.
It is critically essential that the industries and commercial establishments are enabled to survive and sustain at this juncture through which the employment, economy of the individuals and the nation can stabilize.
There relationship between the employer and employees / workers has to symbiotic even at this juncture for the sustainability in long-term. COVID-19 is one such unforeseen disaster post-independence that shifted the paradigm of workforce globally.
The employer ideally should consider the concurrence of its employees / workers to arrive at a certain agreement before determining the deduction or deferment of the wages/salary or the layoff or termination options; unilateral decisions under the influence of fiduciary dominance or coercive convincing of the subservient employees / workers against the provisions of laws is never a successful solution in the long-run.
India as a developing country still has a long way to go forward in working out the terms favorably to the employees / workers. Also it is time to revisit the labor and employment laws. However, the Government has initiated certain measure to ease the situation of the MSME domain and the employers in statutory compliance. We have to wait and watch the outcome.