Salary Dispute in Lockdown

By Team Legal Helpline India, July 14, 2020

Salary dispute in Lockdown or wage dispute in lockdown has erupted due to sudden and unprecedented lockdown of the country under the orders of the Central Government.

The lockdown has been triggered due to COVID-19 under the notification dated 24 March 2020 issued by the Ministry of Home Affairs. Subsequently, several other notifications, orders, circulars were issued by Central Government, NDMA, MHA, and other departments during this period.

The Central Government issued an order under Section 10(2) of the Disaster Management Act on March 29 on the issue of payment of wages.  All notifications were based on the NDM Act. Strangely the notifications dealt only with the various government offices and their activities. No mention initially was made regarding the salary, wages, and remuneration of the employees not working in the government sector or the employees working in the private sector.

This created confusion in the minds of the people leading of eruption of salary dispute in lockdown or the wage dispute in lockdown at various places which still the lockdown continues.

We have tried to explain the entire legal preposition related to the salary dispute in lockdown or the wage dispute in lockdown in the backdrop of the notifications of the government in this regard. We need to understand the nature and scope of the Disaster Management Act, on the basis of which most of the notifications have been issued.

DISASTER MANAGEMENT ACT, 2005 AND SALARY DISPUTE IN LOCKDOWN:

The Disaster Management Act, 2005 provides special powers to the central government in the event of any disaster. The Disaster Management Act, 2005 has an overriding effect on all other laws of the land. The Central government derives its special powers to declare lockdown and to do all the other actions for preventing the spread of the pandemic. This act has special powers over all other acts. It, however, does not deal with any kind of wage dispute in lockdown.

Also Read – Section 138 of Negotiable Instruments Act

Ministry of Labour & Employment, Government of India through its letter dated 20/03/2020, advised all the employers of Public and Private Establishments not to terminate the services of the employees during COVID or to resort to any wage cut or reduction of wages. It was also clarified that if the workers availing leave should be deemed to be at work without any substantial wage cut during the lockdown.

It was also mentioned that if the establishment of the employer remained non-operational due to the COVID-19 lockdown, the workers of such units shall be deemed to be on duty.  This was in fact intended to wage dispute in lockdown. Most of the state governments issued their own order and advisories to avoid wage dispute in lockdown which further created confusion instead of giving clarity on all such issues. In most such orders, the core issue of legal entitlement and legal obligation of the employer and employee has not been dealt specifically thereby leaving the employer and the employees to contest their claims.

WHAT IS SALARY?

The term salary has not been defined under any of the legislations. The term “Wages” has been defined in different Acts. Most relevant is the definition of the term wages as given under the Section 2 (iv) of the Payment of Wages Act, 1936. It reads as under:

“wages” [sec 2 (iv)] means all remuneration (whether by way of salary allowances or otherwise) expressed in terms of money or capable of being so expressed which would if the terms of employment express or implied were fulfilled by payable to a person employed in respect of his employment or of work done in such employment and includes –

(a) any remuneration payable under any award or settlement between the parties or order of a court;

(b) any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period;

(c) any additional remuneration payable under the terms of employment (whether called a bonus or by any other name);

(d) any sum which by reason of the termination of employment of the person employed is payable under any law contract or instrument which provides for the payment of such sum whether with or without deductions but does not provide for the time within which the payment is to be made;

(e) any sum to which the person employed is entitled under any scheme framed under any law for the time being in force, but does not include –

(1) any bonus (whether under a scheme of profit sharing or otherwise) which does not form part of the remuneration payable under the terms of employment or which is not payable under any award or settlement between the parties or order of a court;

(2) the value of any house-accommodation or of the supply of light water medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the State Government;

(3) any contribution paid by the employer to any pension or provident fund and the interest which may have accrued thereon;

(4) any travelling allowance or the value of any travelling concession;

(5) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment; or

(6) any gratuity payable on the termination of employment in cases other than those specified in sub-clause (d).

The term “wages” has also been defined under the Industrial Disputes Act, 1947 in Section 2 (gg) (rr) . The definition as given there is similar to the definition given under the Payment of Wages Act.  It can be safely said that the use of the term wages or salary are the same.

The Payment of Wages Act, Section 3 mandates that the employer is obligated to pay wages to “all persons employed by him.” According to Section 3(2) of the Act, this covers permanent, temporary, casual & badli workers. Section 3(2) further specifies that it shall be the responsibility of the employer to make payment of all wages in case a contractor fails to make the payment. Section 21 of the Contract Labour (Regulation & Abolition) Act, 1970, provides the same. Thus it is clear that all employees working in private employment are entitled to be treated as Workman and the scheme of the legislation mandates the payment of the wages under the Payment of Wages Act. It also casts an obligation on the employer to pay the wages besides declaring the workman entitled to the wages on a monthly basis instead of creating any wage dispute in lockdown.

WHO IS AN EMPLOYEE:

Indian laws on employment are limited only for employees falling under the category of “Workman” as defined under Section 2 (s) of the Industrial Disputes Act which is wide enough also to encompass almost all employees in private employment. The term “Workman” as defined under the Industrial Disputes Act 1947 broadly includes 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, but excludes those employed mainly in a managerial or administrative capacity. This definition excludes those workers who are employed in a supervisory capacity & those who draw wages exceeding Rs 10,000 per men sum.

DATE OF PAYMENT OF SALARY:

Under law the due date for the payment of the wages has been prescribed under Section 5 of the Payment of Wages Act which is 7th of every month for establishments with less than 1000 employees and by the 10th day of the subsequent month for establishments with more than 1000 employees. It is important to take note that the recent circular issued by the MHA has not altered or changed the said date in any manner so it remains the same. So any wage dispute in lockdown would be dealt with under the existing provisions only.

THE NO WORK, NO PAY PRINCIPLE AND THE WAGE DISPUTE IN LOCKDOWN:

There is no law describing the sudden closure of the establishments, factories, offices etc. except for the eventuality as described as “Lay Off” in the Industrial Disputes Act, 1947 which can be pressed into service to get more clarification on the issue of lockdown.  Section 2 (kkk) of Industrial Disputes Act, 1947, defines “lay off”, if an employer is unable to provide employment to an employee due to a natural calamity or for any other connected reason, then the same would fall within the definition of “Lay off”. Section 25C of the IDA mandates employers employing 50 or more workers who lays off workmen to pay compensation equivalent to 50 percent of the wages. Section 25M (1) of the Industrial Disputes Act, requires an industrial establishment with more than 100 workmen to seek prior permission from the appropriate government or such authority.

LAW RELATED TO SALARY DISPUTE IN LOCKDOWN EXPLAINED:

The law related wage dispute in lockdown due to the situation arising out of the lockdown can be seen in the Industrial Disputes Act where adequate provisions have been made in favour of the employees to protect their interest during such eventualities like lockdown.

 Section 2 (kkk) contemplates “lay-off” (with its grammatical variations and cognate expressions) means the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery 6[or natural calamity or for any other connected reason] to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched;

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Explanation.- Every workman whose name is borne on the muster rolls of the industrial establishment and who presents himself for work at the establishment at the time appointed for the purpose during normal working hours on any day and is not given employment by the employer within two hours of his so presenting himself shall be deemed to have been laid-off for that day within the meaning of this clause:

Provided that if the workman, instead of being given employment at the commencement of any shift for any day is asked to present himself for the purpose during the second half of the shift for the day and is given employment then, he shall be deemed to have been laid-off only for one-half of that day:

Provided further that if he is not given any such employment even after so presenting himself, he shall not be deemed to have been laid-off for the second half of the shift for the day and shall be entitled to full basic wages and dearness allowance for that part of the day;

If we read it further in context of the other provisions of the Industrial Disputes Act, we find that lay off is prohibited under the Industrial Disputes Act however, some conditions for permission to lay off has been postulated. The relevant Section 25 M reads as under:

25M. Prohibition of lay-off.- (1) No workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment to which this Chapter applies shall be laid-off by his employer except 3[with the prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereafter in this section referred to as the specified authority), obtained on an application made in this behalf, unless such lay-off is due to shortage of power or to natural calamity, and in the case of a mine, such lay-off is due also to fire, flood, excess of inflammable gas or explosion].

(2) An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended lay-off and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.

Another provision in this regard as given under the Industrial Disputes Act is under Section 2 (l) “lock-out” means the [temporary closing of a place of employment] or the suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him;

This provision is further regulated under Section 24 of the Industrial Disputes Act where the conditions have been described for declaring any lock out as legal or illegal. Although lockdown can be a cause of the closure of the place of employment as contemplated under Section 2 (l) of the Industrial Disputes Act and the employers can take the plea that they had to close their place of employment due to lockdown.

CONCLUSION ON SALARY DISPUTE IN LOCKDOWN:

The issue of the salary dispute during lockdown is unique due to the unprecedented circumstances which no one had visualized ever. Even the lawmakers had never visualized such a situation hence it needs a special definition now which the courts will do only after some dispute is brought before them. But as the law exists, it casts an obligation on the employer to pay the wages to the employees. The term salary has nowhere been defined but it connotes the term wages hence same meaning can be attributed to it. In fact, the salary dispute in lockdown is the wage dispute in lockdown in legal terms.

Since the notifications as issued by the central government does not suspend or override any of the sections of the ID Act or the Payment of Wages Act hence the liability of the employer remains and he is under obligation to pay the wages or the salary despite closure due to lockdown. The situation where the employer has taken permission of lay off or has declared lock out due to closure can be the situations where there can be dispute and the same would be decided by the courts on their merits.

So far as the question of the employees not falling under the category of workman are concerned, they can also invoke the provisions of the Industrial Dispute Act or the Payment of Wages Act or they can go to the civil court for recovery of their salary based on the terms of their employment.

In conclusion it can be said that the employee was prevented from working due to the lockdown and he was willing to work so he is entitled to the salary. However, as mentioned in the circular of the central government, the employers were directed not to remove or terminate the employees during this period hence it is clear that the central government wanted to maintain status quo on the matter. In view of the same, the employees are entitled to the salary for the period of lockdown keeping in view the above discussion.

Another situation may emerge where the employer has sought permission to lay off for the said period but the law is very clear on the point as the employer is under obligation to seek the permission of lay off and without the same, he can not deny work and the resultant salary to the employee. In case the employer has made all the compliance and has declared a lock out due to the situation, the matter can be contested by the employees on merits in view of the circular of the central government.

Reference to the order of the Supreme Court on the issue can also be made wherein the Supreme Court has avoided passing any specific orders on the matter on 12/6/2020 and has observed as under:

“We thus direct following interim measures which can be availed by all the private establishment, industries, factories, and workers Trade Unions/ Employees Associations, etc. which may be facilitated by the State Authorities:

i) The private establishment, industries, employers who are willing to enter into negotiation and settlement with the workers/employees regarding payment of wages for 50 days or for any other period as applicable in any particular State during which their industrial establishment was closed down due to lockdown, may initiate a process of negotiation with their employees organization and enter into a settlement with them and if they are unable to settle by themselves submit a request to concerned labour authorities who are entrusted with the obligation under the different statute to conciliate the dispute between the parties who on receiving such request, may call the concerned Employees Trade Union/workers Association/ workers to appear on a date for negotiation, conciliation and settlement. In the event a settlement is arrived at, that may be acted upon by the employers and workers irrespective of the order dated 29.03.2020 issued by the Government of India, Ministry of Home Affairs.

ii) Those employers’ establishments, industries, factories which were working during the lockdown

period although not to their capacity can also take steps as indicated in direction No.(i).

iii) The private establishments, industries, factories shall permit the workers/employees to work in their establishment who are willing to work which may be without prejudice to rights of the workers/employees regarding unpaid wages of above 50 days. The private establishments, factories who proceed to take steps as per directions (i) and (ii) shall publicise and communicate about their such steps to workers and employees for their response/participation.

The settlement, if any, as indicated above shall be without prejudice to the rights of employers and employees which is pending adjudication in these writ petitions.

iv) The Central Government, all the States/UTs through their Ministry of Labour shall circulate  and publicise this order for the benefit of all private establishment, employers, factories and workers/employees.

38. In event, any settlement is entered between the employers and employees in the establishments which are before us, an affidavit giving details shall be filed by next date of hearing.”

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