Legality of Mandatory Payment of Wages as a Disaster Management Measure

On March 24, 2020 the Government of India announced a twenty-one day nationwide lockdown to prevent and contain the spread of Covid-19, which lock down has been further extended until 3 May 2020.

Pursuant to the announcement of lock-down, in exercise of powers contained in the Epidemics Disease Act, 1897 and the Disaster Management Act, 2005, both Central and State Governments have issued orders, notifications, press notes, guidelines, advisories and circulars (Notifications) in connection with the manner of implementation of the lockdown and various aspects connected therewith.

While these Notifications deal with measures to be adopted to ‘prevent and contain’ the spread of Covid-19, a few measures contained in the Notifications go beyond the realm of ‘prevention and containment’ of Covid-19. One such measure is the direction to all private establishments to make payment of wages /salaries in full to their workers/employees during the lock down period.

March 20, 2020 (Advisory)

The Ministry of Labour and Employment, Government of India, issued D.O.No. M-11011/08/2020-Media to All Employer’s Association, with the following ‘Advisory’ –

“In the backdrop of such challenging situation, all the Employers of Public/Private Establishments are advised to extend their coordination by not terminating their employees, particularly casual or contractual workers from job or reduce their wages. If any worker takes leave, he should be deemed to be on duty without any consequential deduction in wages for this period...”

Pursuant to the above Advisory issued by the Ministry of Labour and Employment, Government of India, several State Governments such as Delhi, Haryana, Kerala, Maharastra, Punjab, Telanagana etc., issued advisories/orders directing the private establishments/government to consider the employees as ‘on duty’ and pay the wages to their employers during the period of lockdown. These advisories/orders also refrain the employers from terminating the employees during the lockdown period.

March 29, 2020 (Order)

The Ministry of Home Affairs, Government of India, in exercise of powers contained in Section 10(2)(l) of the DMA, by way of Order No. 40—3/2020-DM-1(A) made the earlier Advisory of 20 March 2020 regarding on payment of wages by private establishments/government mandatory by directing that any violation will be punishable under the DM Act. The Order reads as under:

“Whereas, to deal with the situation and for the effective implementation of the lockdown measures, and to mitigate the economic hardship of the migrant workers, in exercise of the powers, conferred under Section 10(2)(l) of the DMA, the undersigned, in the capacity as Chairperson, National Executive Committee here directs the State/Union Territory Government and State/Union Territory Authorities … to take following additional measures:

(i) …

(ii) …

(iii) 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 work places, on the due date, without any deduction, for the period their establishments are under closure during the lockdown; ...”

This article examines the validity and enforceability of the Orders vis a vis the direction to all private establishments to make payment of wages /salaries in full to their workers/employees during the lock down period.

Epidemic Diseases Act, 1897 (ED Act)

The objective of the Epidemic Diseases Act is to address the spread of ‘Dangerous Epidemic Diseases’. In the wake of an outbreak of any dangerous epidemic disease, the Epidemic Diseases Act enables the Central Government to take suitable measures and prescribe regulations for the inspection of any ship or vessel leaving or arriving at any port in India and or detain any person intending to sail therein, or arriving thereby, as may be necessary[1]. Similar powers are also vested on the State Governments also to prescribe temporary regulations to be observed by the public to prevent the outbreak of such disease or the spread thereof[2]. Disobeyance of any regulation or order made under this the Epidemic Diseases Act is punishable under Section 188[3] of the Indian Penal Code[4].

Disaster Management Act, 2005 (DM Act)

The Disaster Management Act, 2005 was promulgated with the objective of providing a framework for the effective management of disasters.

‘Disaster’ is defined as a catastrophe, mishap, calamity or grave occurrence in any area, arising from natural or man-made causes, or by accident or negligence which results in substantial loss of life or human suffering or damage to, and destruction of, property, or damage to, or degradation of, environment, and is of such a nature or magnitude as to be beyond the coping capacity of the community of the affected area[5].

Disaster Management[6] means a continuous and integrated process of planning, organising, coordinating and implementing measures which are necessary or expedient for—

(i) prevention of danger or threat of any disaster;

(ii) mitigation or reduction of risk of any disaster or its severity or consequences;

(iii) capacity-building;

(iv) preparedness to deal with any disaster;

(v) prompt response to any threatening disaster situation or disaster;

(vi) assessing the severity or magnitude of effects of any disaster;

(vii) evacuation, rescue and relief;

(viii) rehabilitation and reconstruction

The DM Act lays down institutional and coordination mechanism for disaster management i.e. effective prevention, management and mitigation of disaster at the national, state, district and local levels by formation of National Executive Committee and State Executive Committee for providing effective management of disasters which deal with prevention, mitigation, capacity-building, preparedness, rehabilitation, reconstruction, etc[7].

From an examination of provisions of the DM Act and its constitutional make-up it is evident that the DM Act imposes overt obligation on the Central and State Governments to take ensure effective measures for the prevention, mitigation and management of a disaster. Nothing contained in the DM Act states or remotely indicates that the DM Act confers or vests any power with the Central or the State Government to direct the payment of wages/salaries by private establishments.

Constitution of India

A careful reading of the Advisories and Orders of the Central and State Governments will show that the rationale for the direction to the private establishments to pay wages/salaries and not terminate the employees is to “not weaken their financial condition’ and ‘mitigate the economic hardship’ the employees will face during the lock down period which could have a direct impact on their right to life and livelihood - to live with dignity.

India is a welfare state and the Constitution makes it imperative for the State to secure to its citizens rights guaranteed by Constitution. Article 21 of the Constitution of India which guarantees to every citizen protection of his life and personal liberty, is repository of all important human rights which are essential for a person or a citizen. When there is a natural calamity the State as guardian of the people (Parens Patria) is obliged to provide help, assistance and support to the victims of such natural calamities to help them to save their lives[8].

Payment of Wages / Salaries a Moral Obligation

On April 10, 2020, the Ministry of Corporate Affairs, Government of India, by way of General Circular No. 15/2020, in connection with a query of “Whether payment of salary/wages to employees and workers, including contract labour, during the lockdown period can be adjusted against the CSR expenditure of the companies?”, clarified that payment of salary/ wages to employees and workers during the lockdown period (including imposition of other social distancing requirements) shall not qualify as admissible CSR expenditure.” The rationale for disallowing the payment was that payment of salary/ wages in normal circumstances is a contractual and statutory obligation of the company and that payment of salary/ wages to employees and workers during the lockdown period is a moral obligation of the employers, as they have no alternative source of employment or livelihood during this period.

It is a settled principal of law that a moral obligation cannot be converted into a legal obligation. Dealing with morality and law, the Hon’ble Supreme Court of India in the case of Raghunathrao Ganpatrao v. Union of India[9], observed as under:

Morality in general is the art of directing the actions of men in such a way as to produce the greatest possible sum of good. Legislation ought to have precisely the same object. But although these two arts, or rather sciences, have the same end, they differ greatly in extent. All actions, whether public or private, fall under the jurisdiction of morals. It is a guide which leads the individual, as it were, by the hand through all the details of his life, all his relations with his fellows.

Legislation cannot do this; and, if it could, it ought not to exercise a continual interference and dictation over the conduct of men. Morality commands each individual to do all that is advantageous to the community, his own personal advantage included. But there are many acts useful to the community which legislation ought not to command. There are also many injurious actions which it ought not to forbid, although morality does so. In a word legislation has the same center with morals, but it has not the same circumference.

Conclusion

While the intention of the Government in issuing these Orders cannot be questioned in my opinion these Orders cannot stand the test of law for the following reasons:

1. The Industrial Disputes Act, 1947 (ID Act) which governs the relation between employer and employee provides adequate protection and safeguards to the employees against any unlawful and illegal acts of the employer. Section 25M recognizes that, a natural calamity, is likely to disrupt not just lives of individuals but also companies and other economic units and hence an employers is permitted to lay-off their employees as a result of a natural calamity[10]. A right that has been conferred pursuant to a statute cannot be abrogated by an Order of an instrumentality of State, save and except by due process of law.

2. The DM Act does not confer or vest any power with the Central or the State Government to direct the payment of wages/salaries by private establishments. It may be argued that the Orders are issued pursuant to Section 35 (l) and 38 (l) of the DM Act which provide the Central and State Government to take ‘such other matters as it deems necessary or expedient for the purpose of securing effective implementation of the provisions of this DM Act’ and that the DM Act has an overriding effect by virtue of Section 72, however, such an argument must fail in light of Section 35 and 38 of the DM Act stipulating that the measures taken must be ‘subject to the provisions of the Act’ and end with ‘for the effective implementation of the provisions of this Act’ and there is nothing even remotely mentioned in the DM Act that confers or vests any power with the Central or the State Government to direct the payment of wages/salaries by private establishments.

3. The Constitution makes it imperative for the State to secure to its citizens rights guaranteed by Constitution. When there is a natural calamity the State as guardian of the people (Parens Patria) is obliged to provide help, assistance and support to the victims of such natural calamities to help them to save their lives. The rights of the citizens and the obligations of the State cannot be assigned to a private establishment by way or an order under the DM Act.

4. The Orders can at best, as rightly observed by the Ministry of Corporate Affairs, be held to be moral and humanitarian obligations and cannot be enforced as legal obligation.

It will be interesting to note that, inspite of the issuances of the Advisory and the Order, Government of Telangana by way of its notification, G.O. Ms. No. 27 dated March 30, 2020, has deferred the wages/ salaries, including all allowances and perks/ allowances etc., on the ground of economic impact caused due to lockdown and consequent lack of inflow of resources and in the view of additional expenditures being incurred to control the epidemic.

The Central Government also by way of The Salary, Allowances And Pension of Members of Parliament (Amendment) Ordinance, 2020 has also taken steps to reduce the salaries, allowances and pensions of Members of Parliament (MPs) by 30 per cent for one year for purposes of raising resources to manage and control Covid-19.

Calamity is a leveler – rich and poor, strong and week are suffering alike[11]. The circumstances resulting in the reduction of the salary by the Government are no different to those being faced by the private establishments and hence ‘what is good for goose should be good for gander’.

The lack of business due to the lockdown, the impact on business due to COVID – 19 and the continued payment of salaries and wages etc could potentially drive the private establishments into insolvency, unless suitable economic policies and financial measures are brought in by the Government to safe guard the industry and economy.

Duvva Pavan Kumar is an advocate based out of Hyderabad practising before the High Court and NCLT. He is the founder of The Law Chambers. He was assisted by Shraddha Gupta.

[1] Section 2A of the Epidemic Diseases Act, 1897.

[2] Section 2 of the Epidemic Diseases act, 1897.

[3] Section 188 of the Indian Penal Code 1860 deals with Disobedience to order duly promulgated by public servant and provides for an imprisonment of a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

[4] Section 3 of the Epidemic Diseases act, 1897.

[5] Section 2(d) of the Disaster Management Act, 2005.

[6] Section 2(e) of the Disaster Management Act, 2005.

[7] Section 35 and Section 38 of the Disaster Management Act, 2005.

[8] B.J. Diwan vs. State of Gujarat AIR 2002 Guj 99.

[9] Raghunathrao Ganpatrao and Ors. vs. Union of India (UOI) AIR 1993 SC 1267

[10] Section 25M in The Industrial Disputes Act, 1947

[11] Supra 10.