The Federation of Indian Chambers of Commerce and Industry (FICCI) has been seeking legal opinion on whether organisations are bound by law to provide remuneration to employees in the current crisis-like situation.
On March 27, the Ministry of Labour and Employment issued a circular advising all industry bodies, companies and enterprises to not retrench any employee during this time and keep paying them their full wages or salaries. Post that, on March 29, the Ministry of Home Affairs issued an order to constitute an Empowered Committee under the Disaster Management Act of 2005, directing full payment of wages to the workmen.
The issue here is that such a mandate has come from the Centre at a time when organisations are hardly making any money. Faced with the prospect of having to pay full salaries and wages during a period of scarce economic activity, has raised concerns among the businesses.
The Federation of Indian Chambers of Commerce and Industry (FICCI) has been seeking legal opinion on whether organisations are bound by law to provide remuneration to employees in the current crisis-like situation, when organisations and businesses have either ceased, become insolvent or have been severely affected by the current pandemic and the subsequent lockdown.
Legal experts have given their inputs on the matter.
Whether or not a company is liable to pay its employees full remuneration depends on what kind of situation it is in.
If the business or a part of it is functioning without incurring losses, or if it is able to get the work done by its employees working from their homes or remotely, then such an organisation will be required to comply with the order given by the Government on March 29. In other words, such employers will be required to provide full payment to workmen during the lockdown.
On the other hand, in cases where work from home is not possible, and the business in question is incurring financial losses so much so that it is financially and economically incapacitated to the point of pulling down the shutters in the current situation of lockdown, then such a business is not mandated by any existing law to provide for its employees.
After all, if the parent is sick, how will the child be taken care of?
Moreover, no law— including the Industrial Disputes Act, 1947, Payment of Wages Act, 1937 or the Contract Labour Act, 1970, among others— provides any measures for a situation like the current one, when work is ceased due to a pandemic. Also, laws do not mandate that the employer has to provide full payment even in the case of a business shutting down.
However, even though the health of the company is an important point of consideration, the employer within its capacity, must make sure that the employees who will be hit the hardest, such as the migrant workmen, casual and contract labourers who will be unable to fend for themselves in the event of a crisis situation, are taken care of as per the requirements of the Centre and State governments, and on humanitarian grounds as well.
As for the other employees who have the capacity to save and do not fall under the category of workmen, the organisation can either reduce or deduct their salaries, as is already being done, or it can keep their salaries in abeyance for the time being.
If and when the situation gets resolved, recovery is going to be tough and will require the support of all stakeholders, including the Government, to get the economy back in shape.