The Government has appealed to companies to refrain from laying off employees during the lockdown period. But are the companies obliged to follow this? On what conditions can an employer ask the employees to quit or force a salary cut? These are pertinent questions to which all small or medium employers seek answers.
HRKatha speaks to Subramanyam S., founder, CEO and president, Ascent HR, to find the answers to some of these questions.
Can an employer terminate an employee during lockdown?
No. In the current circumstances, employers cannot terminate their employees as per the notifications issued by the Central Government under the Disaster Management Act, 2005, and by some states under the Epidemic Diseases Act, 1897 read with the Disaster Management Act or under State Epidemic regulations, which are binding on all enterprises notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
In view of the said notifications/orders, as mentioned, the employers must pay full salary without any deduction during the period of lockdown. This also indirectly means that the employees cannot be terminated, because termination results in loss of wages, prohibited under both the Payment of Wages Act and the recent notifications.
Can an employer reduce the wages of employees, say 30 per cent, as a short-term measure for three months?
Again the answer is No. Specifically, any reduction will go against the spirit of Section 7 of the Payment of Wages Act, 1936, including the COVID-19 related circulars that prohibit such reductions.
Can an employer allow voluntary reduction of wages with the consent of the employee?
The structure of compensation is derived from the contract of service or employment as the case may be. It is, therefore, a private contract between the employer and the employee. Though a change in the contract should generally not be deemed as Contracting out, since there is no mandated compensation structure (except in case of minimum wages) the notification under the Disaster Management Act, 2005 would cover the reduction of wages as well. Therefore, the employer cannot reduce wages as long as the Disaster Management Act notification is in force, either on its own or even voluntarily, when the employee provides consent to such an Act.
Can a fixed-term employee be relieved at the end of the contract time? Or does this warrant the direction of termination?
Fixed-term employment ends on the expiry of the period of contract and does not attract provisions of these notifications. An employee can be relieved at the end of the contract period.
Can an employee under probation be relieved at the end of the probation period?
Similar to the fixed-term contract, if the letter of appointment is clear about exercising a right of not continuing employment or engagement in the event of non-extension of probation, that should operate without warranting the lockdown provisions announced.
Can a person on notice period, who has resigned voluntarily, be relieved?
When a voluntary separation is in process prior to the commencement of the lockdown or even after the commencement of lockdown, a voluntary resignation should not have any challenges and employees can separate voluntarily.
Can an employee who is put under a PIP be relieved after due process of PIP?
A performance improvement plan (PIP) is a process initiated as part of the disciplinary action proceedings and will amount to involuntary separation warranting termination, and therefore, should not be carried out. One can keep the process in abeyance until the provisions are revoked and continue immediately, post such period.
Can management refuse to pay annual bonus and variable pay, which is not part of gross salary?
Agreed remuneration as per the contract of service or employment should be paid and this is generally referred to as gross salary and applicable regulatory benefits. Any benefits or other payments, which are over and above the regulatory ones, will need to be observed in line with the terms and conditions imposed as per the policy governing those benefits or payments and may not be mandatory to warrant lockdown provisions. However, anything that accrues to an employee, even if outside such purview, would be payable even at a later date.
Can employers force employees to take annual leave or other leave during period of lockdown?
No. Employers cannot ask employees to go on leave for the period of lockdown nor can they debit their leave account without intimation. In addition, if an employee suffers from COVID, she/he would have additional leave of 28 days or such days as applicable in the state.
If there is no leave balance, can employers force the employees to be on loss of pay (LOP)?
No debit is possible either as leave or as LOP.
Can the employers retrench or lay off the workforce?
The very idea of non-termination is to protect employment during the period of lockdown, and hence, no retrenchment or layoff can be effective.
Can the employers close down the establishments?
No. They are deemed to work during the period of lockdown.
Can employees be forced to work during lockdown?
No. employers cannot force employees to work during lockdown. States have permitted certain categories of workers or industries to operate during this period and that shall be the only exception.
What are the various laws that employers need to be mindful of, before they take any adverse decisions to change the service conditions of their employers?
Employers should take cognizance of all prevailing labour laws, but more importantly, the notification issued by the Central Government under the Disaster Management Act, 2005 or under the State-specific regulations under the Epidemic Diseases Act, 1897 read with the Disaster Management Act, 2005.