• Dr. Mohan Dewan assisted by Adv. Aboli Kherde and Adv. Shubham Borkar

Private sector organizations are already planning to have major job cuts/layoffs due to their financial inability to support their employees amidst losses caused due to the lockdown. According to a survey, conducted by MyHiringClub.com and Sarkari-Naukri.info conducted between May 1 to May 10, 2020, that covered 1,124 companies across 11 industry sectors in 25 major cities. Around 68 percent of the employers surveyed have either started the layoff process or are planning to do so.

• 73 % of employers have planned for a salary cut.

• 57 % said this layoff is temporary.

• 21 % said they are doing permanent layoffs for at least 2 years.

Only 32 percent of employers did not have any job cut/layoff plans.

Root Cause

The continuous lockdown has resulted in decreasing revenue, drying up cash reserves. As stated above the government has directed all states to mandate that employers in all industries, shops, and establishments must pay their workers without any deduction. Respective states have also issued their directions to the private sector.

MHA going "Back and Forth"

Under the MHA Wage Order dated 29th March 2020, some states issued orders and some issued advisories advising or directing employers not to terminate the employees/workmen and to treat the lock-down period as a 'paid leave' for all its employees. This was extended with the extension of lockdown beyond 31st March.

The MHA Wage Order along with several other state advisories and directions were challenged by the industry before the Supreme Court of India as being unconstitutional on the ground that they infringe the fundamental right to freedom of the industrial units and enterprises to carry on any occupation, trade or business under Article 19 of the Constitution of India as it will lead to the collapse of the industrial units if they are forced to pay salaries without any revenue. The notices have been issued in the petitions to the Government of India and respective states, but no stay order has so far been granted by the Apex Court other than an order in a few of the petitions that no coercive action will be taken against the employers.

Notwithstanding the above MHA Wage Order and state government directions, many employers initiated measures such as reduction of salaries (forced as well as voluntary), leave without pay, adjusting the applicable annual paid leaves against the days without work, terminating a large number of employees and in some extreme cases declaring bankruptcy.

Trade unions and workers have also filed counter petitions seeking protection from wrongful termination and payment of wages. In one such petition filed by the Rashtriya Shramik Aghadi, a contract laborers' union, the Aurangabad Bench of the Bombay High Court, on May 12, 2020, held that the principle of 'no work-no wages' cannot be applied during the present extraordinary situation prevailing in the country due to the COVID-19 pandemic and directed the principal employer to ensure that the contractor pays full wages, save and except food allowance and conveyance allowance, to the employees for the months of March, April and May 2020.

When the lockdown was extended till May 31, 2020, MHA vide its order dated May 17, 2020, ceased all previous orders issued by the National Executive Committee in the exercise of its powers under Section 10(2) (l) of the Disaster Management Act, 2005 with effect from May 18, 2020. One of the orders that now stand withdrawn is the MHA Wage Order which made it mandatory for all the employers 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".

The new MHA Order has lifted most of the restrictions including the restrictions on private offices and industrial units to operate (subject to certain social distancing/protection norms and following the practice of working from home as far as possible), the previous MHA Wage Order that all the employers, will need to make payment of wages of their workers, without any deduction, for the period their establishments are under closure during the lockdown will not be applicable. Employers whose units/organizations lie in places other than containment zones are now authorized to normalize their operations and require employees to report back to work.

However, the unorganized manner in which the government is letting out directions, going back and forth on its stand, has created hardships for private employers and labor contractors, they are unable to plan their way out of the pandemic. Already overburdened from decreasing profits and restricted cash inflow, employers are trying very hard to manage their workforce, support their employees financially and mentally in this lockdown period. Hence issuing reasonable directions and then staying by them is expected from the State Governments. Governments need to understand that Employers/ entrepreneurs are the ones who would bring the Indian economy back on track and hence losses caused to them because of poor implementations of directions and periodic shifts in the operating procedure is setting back India in the long run.


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