Deduction of Wages and Lay-offs

While there is a provision of temporary lay-off of workmen, with certain prescribed conditions, under the Industrial Dispute Act, 1947 especially on account of natural calamity (please note that COVID-19 has been declared natural calamity by the Ministry of Finance), the government of India had specifically directed, by way of issuance of a circulars dated 20th March 2020 and 29th March 2020 under Section 10(2)(l) of the Disaster Management Act 2005, that the employees of any place of employment made non-operational due to COVID-19 will be deemed to be on duty and that the payment of wages shall be made without any deductions. Similar measures were adopted by a number of state governments in India.

The measures adopted by the Government of India were challenged before the Supreme Court of India and the matter is currently sub juice.

However, the order of the Ministry of Home Affairs (Government of India) dated 17 May 2020 that has extended the lockdown until 31st May 2020 with considerable relaxation specifically mentions that all the orders issued under Section 10(2)(l) of the Disaster Management Act, 2005 shall cease to have effect from 18th May 2020.

Therefore, it is understood that with effect from 18th May 2020, there is no restriction on lay-off and deduction of wages of workmen as long as the procedure prescribed under applicable laws including the Industrial Dispute Act, 1947 is followed.

It must be noted that certain state specific measures that prohibit employers from deducting wages and lay-off of employees during the lockdown may still be applicable in certain states and therefore state specific laws and orders must be analysed before any action is taken.

State Specific Relief to Labour and Employment Laws:

As the saying goes “desperate times call for desperate measures”, the state governments in India are taking desperate measures to minimize the impact of COVID-19 on economy and industry. Certain states in India have recently promulgated certain temporary measures to ease the labour and employment laws.

The State of Madhya Pradesh has issued a circular regarding disbursement of wages/salaries to workers in factories/shops and commercial establishments which have been permitted to resume operations during the lockdown subject to certain conditions.

The circular clarifies that in the event the workers voluntarily remaining absent, the management would be at liberty to deduct their wages for their absence subject to the procedure laid down in law while initiating such action on the basis of 'No work No Pay' principle.

The State of Madhya Pradesh has further exempted all factories registered under the Factories Act, 1948 with effect from 20th April 2020 for a period of three months in the state from Section 51 (Weekly Hour), Section 54 (Daily Hour), Section 55 (Interval of Rest), Section 56 (Spread Hours).

Therefore, factories situated in Madhya Pradesh registered under the Factories Act may avail the benefit of extended working hours in adherence to the specific instructions issued hereinabove including payment of overtime wages. The given exemption is announced under section 5 of the Factories Act, 1948 that empowers a state government to exempt any factory or a class of factories from all or any of the provision of the Factories Act for a period of up to three months.

Further, the State of Madhya Pradesh has exempted all new factories (registered on or after 05th May 2020), for the next 1,000 days from the date of publication of the notification, from certain provisions of Industrial Disputes Act, 1947.

The exemption is not applicable on provisions related to lay-off and retrenchment of workers, and closure of establishments under Chapter VA and certain sections of Chapter VB. It must be noted that exemption from applicability of Section 25M under Chapter VB has been provided which section prohibits lay-offs unless prior approval of the government is obtained.

Therefore, while the lay-off procedure under Chapter VB must be followed, there is no need to apply for the prior permission of the government under Section 25M.

The Government of Maharashtra by exercising the powers under Section 65(2) of the Factories act 1948, has exempted factories from the provisions of Section 51 (Weekly Hour), Section 54 (Daily Hour), Section 52 (Weekly Holidays), and Section 56 (Spread Hours), along with the following conditions mentioned:

A) Overtime pay should be paid at double the normal wages;

B) It is the responsibility of the occupier to ensure that changes in working hours do not affect the safety of chemical/other hazardous factories;

C) Working hours on any day should not exceed twelve (12) hours;

D) Working hours on any day should not exceed thirteen (13) hours, including rest time;

E) Total working hours in any week should not exceed sixty (60) hours;

F) No worker should be given continuous overtime work for seven (7) days in a row;

G) Overtime hours in any quarter should not exceed one hundred fifteen (115) hours;

H) Factory occupier should take all necessary precautions to prevent the spread of coronavirus;

I) There should be a safe distance between the two workers during the manufacturing process in the factory and the use of masks is mandatory;

J) The said relaxation period shall be deemed to be as specified in Section 64 of the Factories Act, 1948 till June 30, 2020.

A number of other Indian states including Gujarat, Rajasthan, Haryana, Himachal Pradesh, Assam and Uttarakhand have either extended temporary reliefs very similar to those provided by the State of Madhya Pradesh and Maharashtra or are in the process of undertaking similar measures.

It would be important to note that a public interest litigation has been initiated at the Supreme Court of India against these temporary measures and the matter is currently pending for disposal.

Similarly, the State of Uttar Pradesh had also vide notification No. 13 /2020/ 502 /XXXVI-03-2020- 30 (Sa.)/2020TC exempted all factories registered under the Factories Act, 1948 in the state from the provision of Section 51 (Weekly Hour), Section 54 (Daily Hour), Section 55 (Interval Of Rest), Section 56 (Spread Hours), Section 59 (Extra wages for overtime) with effect from 20th April 2020 until 19th July 2020 subject to certain similar conditions.

However, it must be noted that the State of Uttar Pradesh has since withdrawn the said notification and the exemption thereof.

On the other hand, the State of Uttar Pradesh has cleared the Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020 (“Ordinance”) that proposes to exempt all factories and establishments engaged in the manufacturing process from all the labour laws in the State for a period of three (3) years except certain provisions relating to safety and security of workers under the Factories Act, 1948 and the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996; provisions of various labour laws relating to the employment of children and women; Bonded Labour System (Abolition) Act, 1976; and Section 5 of the Payment of Wages Act, 1936 (the right to receive timely wages). The exemption under the Ordinance are subject to certain compliances such as:

A) Names and details of all employed workers shall be entered electronically on attendance register prescribed under section 62 of the Factories Act, 1948;

B) Workers must be paid minimum wages as prescribed by the government of Uttar Pradesh from time to time;

C) Wages of the workers shall be paid in their bank account;

D) Workers shall not be allowed or required to work for more than eleven (11) hours per day and the spread over (i.e. overall time spent at work including rest periods) shall not be more than twelve (12) hours in a day;

E) Compensation for any death or disability due to any accident during the course of employment shall be paid in accordance with Employees Compensation Act, 1923.

Constitutional validity of the Ordinance

Please note that the Seventh Schedule of Constitution of India divides the legislative powers between the state and central governments; labour laws are part of the Concurrent List that allows both the central as well as the state governments make laws relating to the subjects therein.

However, article 254 of the Constitution of India provides that if any provision of a law made by a state is repugnant to any provision of a law made by the central government with respect to any of the matters enumerated in the Concurrent List, then the law made by the central government shall prevail and the law made by the state shall, to the extent of the repugnancy, be void.

Nonetheless, there’s an exception to the above rule i.e., if a law by a state legislature is repugnant to an Act of Parliament (laws made by the central government) or an existing law with respect to a matter enumerated in the Concurrent List, such law, if it has been reserved for the consideration of the President of India and has received his assent, prevail in that state upon the assent of the President of India. Therefore, the proposed Ordinance will become a law only upon the assent of the President of India, which as per the available information, has not been granted as on the date of this note.

Author: Pankaj Singla, Partner (pankaj.singla@corpacumen.com)

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