Various private enterprises in the country began a campaign of illegal mass terminations of employees, withholding of salaries, or illegal deduction of salary in utter disregard of the government’s directives, advisories, and appeals, taking advantage of the country’s deadlock condition. The employers who are on dominant position have been taking harsh decisions and unconscionable bargains with the employees. A balance therefore needs to be drawn between the rights of the employers and those of the employees, the latter being the more disadvantaged class.
The MHA order, which was issued within the authority granted to it by the Disaster Management Act of 2005, clearly states the employer’s responsibilities to its employees during the lockdown caused by the Covid-19 crisis, and is given below:
“All the employers, be it in the industry or in the shops and commercial establishments, shall make payment of 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;”
Therefore, it is absolutely clear that the same applies to workers, drawing wages, at their workplace. It also states that this is applicable only to those organizations that are closed during the lockdown.
The Payment of Wages Act, 1936 defines what ‘wages’ is. The preamble to the Payment of Wages Act states that it is an act to regulate the payment of wages of certain classes of employees, whereas it is expedient to regulate the payment of wages to certain classes of employees. This makes it clear that there are other classes of employees to whom wages need not be paid. Wages according to section 2(vi) and section 3 of the Payment of Wages Act clearly states that employers shall pay wages to their workers engaged in factories and other establishments governed by the act. The Payment of Wages Act does not apply to most corporations and workers who work in factories and other businesses but do not conduct managerial, administrative, or supervisory tasks as indicated above. Also, the Payment of Wages Act clearly states under section 1(6), it is applicable on such class of employees whose wages do not exceed INR 24000 per month.
Wages under the Industrial Disputes Act, 1947 needs to be paid only to workman. The term workman is defined as per Section 2(s) of the Industrial Disputes Act and it applies to people performing manual, unskilled, skilled, technical, operational, clerical or supervisory work. But it does not include any person employed in a managerial or administrative capacity. It also does not include those who earn wages exceeding INR 10,000.
The Shops and Commercial Establishments Act, 1961 (each state has its own Shops and Commercial Act along with specific set of rules), states that wages need to be paid to employees as per the Payment of Wages Act.
It is clear from the preamble and definition of terms under the various legislations as well as the MHA order that the employers are mandated to pay only wages to eligible employees who are as follows: a) employees of an industrial establishment that are workmen; and b) employees of shops and establishment that are non-exempted by the SCE Act of the respective state.
The various Indian labor legislations provide protection only to those employees that earn wages under the Payment of Wages Act. For all other employees, their relationship with the employers is entirely governed by the employee handbooks and/or their employment agreements. As a result, there is no legal requirement for corporations to pay these employees a salary. The companies may also defer or alter payment terms, if there are such business conditions that may cause loss to the company or lead the company to insolvency. This can be accomplished by speaking with employees in writing and receiving either express or inferred approval from them.
ISSUANCE OF NOTICE OF TERMINATION
Employers have the option of terminating employees who are not obligated to be paid wages under the MHA order and whose services do not fit within the scope of the MHA order. Such employees will be terminated according to the employment contract duly executed between them and/ or as per the SCE Act of the relevant jurisdiction where the employee is located and is engaged by the employer.
Example: Under the Karnataka Shops and Establishments Act, 1962, mandates employers to provide a minimum of 1 month of notice prior to dismissal or wages in lieu of such notice for an employee who is in continuous employment of the employer for the period of 6 months or more. Further, the Karnataka Act also prescribes that any such termination shall be made by giving a reasonable cause to the employee.
In the case of ‘workmen’ (as defined in the Industrial Disputes Act, 1947), employers must give 30 days’ notice for termination for convenience. In the case of other employees, including supervisory, administrative and managerial personnel, most states also provide for 30 days’ notice for termination for convenience, with a provision for payment in lieu of notice.
REMEDIES FOR WRONGFUL TERMINATION
There are situations where the grounds for termination are arbitrary. It sometimes appears that these grounds were practically dragged into the employment agreement, under broad headings like non-performance or misconduct on the side of the employee. Basically, an employer has to prove the grounds of termination before a disciplinary committee or court. If he fails to do so, he must adequately reimburse the employee for the wages earned during the period in question.
Once a person has established the reason for wrongful termination, they can choose the correct legal remedy against their company or employer.
- The Payment of Wages Act, 1936
- The Industrial Disputes Act, 1947
- The Shops and Commercial Establishments Act, 1961
- Rishi Arora, Covid-19 lockdown: Statutory requirements to pay wages, CA Club India, https://www.caclubindia.com/articles/statuory-requiremets-to-pay-wages-during-covid-19-lockdown-40998.asp
- Jidesh Kumar, Employee Termination during Covid-19 crisis, Mondaq, https://www.mondaq.com/india/employment-and-workforce-wellbeing/923218/faq39s-for-indian-employers-can-employees-be-terminated-during-covid-19
I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.
If you are interested in participating in the same, do let me know.
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