Supreme Court: Employers & Workers can negotiate lockdown wages

In Ficus Pax Private Ltd.& Ors. Versus Union of India & Ors., Supreme Court of India on 12th June 2020 on an interim order said that private establishments, industries and employers can negotiate with workers/ employees and arrive at a settlement regarding payment of wages for 50 days or any other period during which their establishments were closed due to the lockdown.

This case started with a number of petitions which challenged Clause (iii) of the Ministry of Home Affairs (MHA) order dated 29th March 2020. Clause (iii) of the impugned MHA order provided that-“All the employers, be it in the industry or in the shops and commercial establishments, shall make payment of wages of their workers/employees, at their work places, on the due date, without any deduction, for the period their establishments are under closure during lockdown period.”

Challenging the Clause (iii) of the Order, the petitioner said that the notification is contrary to the provisions of Article 14 and it is arbitrary, illegal, irrational and unreasonable interference with the rights of Employers under Article 19(1)(g).  The order is also contrary to the principles of ‘equal work equal pay’ and ‘no work no pay’, as it does not differentiate between the workers/employees who are working during the lockdown period and the workers/employees who had not worked at all.

Again, it is argued that Ministry of Home Affairs, cannot invoke Section 10(2)(l) or any other provisions of Disaster Management Act, 2005, to impose financial obligations (such as payment of wage) on the private sector. The Central Government has the power to allocate funds for 6 emergency response, relief, rehabilitation, mitigation of disasters under Disaster Management Act. The ultimate onus for any compensation towards workers/employees shall ultimately be of Government and the said liability cannot be shifted upon the employers in the Private establishment.

Taking into consideration all the matters, the Supreme Court noticed that all industries/ establishments are of different nature and of different capacity, including financial capacity. Some of the industries and establishments may bear the financial burden of payment of wages during the lockdown period to its workers/ employees. Some of them may not be able to bear the entire burden. Hence, a balance has to be struck between these two competitive claims.

The obligatory orders having been issued on 29th March 2020 which has been withdrawn w.e.f. 18th May 2020, in between there has been only 50 days during which employers were under legal obligation to pay wages to the workers/employees.

The Supreme Court held that both Industry and Labourers need each other. No Industry or establishment can survive without employees/labourers and vice versa. So, for smooth functioning of industry/establishments, the Supreme Court of India has decided the following measures-

  1. 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 their 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.
  2. If they are unable to settle, parties could approach the Labour Department, which could facilitate a settlement, but efforts should be made to settle disputes between workers and employers. Once the settlement is made, that will be valid between the employers and workers/ employees irrespective of the order dated 29th March 2020 issued by the Government of India, Ministry of Home Affairs.
  3. Those employers’ establishments, industries, factories which were working during the lockdown period although not to their capacity can also take the above-mentioned step.
  4. The private establishments, industries, factories shall permit the workers/ employees to work in their establishment who are willing to work, which may be without payment wages of above 50 days. However, other rights of the employees shall be in place.
  5. The private establishments, factories who proceed to take steps as point no.1,2 and 3 shall publicize and communicate about their such steps to workers / employees for their response/participation.
  6. The Central Government, all the States/UTs through their Ministry of Labour shall circulate and publicize this Supreme Court order for the benefit of all private establishment, employers, factories and workers/employees.
  7. In the meantime, no coercive action, against the employers shall be taken pursuant to notification dated 29th March 2020.

However, it is an interim order (order issued during the pendency of the litigation) and the Supreme Court did not decide the validity of the notification itself. The court has further asked the Centre to file a detailed counter affidavit in two weeks. The case would be taken up again in the last week of July.

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