As the world of work undergoes drastic changes due to the sudden outbreak of the Coronavirus, there are so many questions pertaining to the legal implications of some actions that employers might take due to the COVID-19 crisis. Should they reduce salaries or withhold bonuses? Can they retrench employees? Should they provide pay to their employees if they are unable to come (or prohibited from coming) to work due to the COVID-19 outbreak? There are many questions like these that have a legal implication and must be answered by legal experts.
People Matters in collaboration with Economic Law Practice (ELP) brings to you this weekly FAQ series that addresses the many employment-related issues that employers are facing in the wake of the COVID-19 coronavirus.
In this weekly series, we have created a Frequently Asked Questions (FAQ) document, which will be posted every Friday and will be continuously updated with frequently asked questions by employers and employees.
In this first part of the weekly series, experts from ELP, Tushar Ajinkya, Partner & Ashish Prasad, Partner, address the most frequently asked questions around workforce management.
Q1. Are advisories with respect to the non-termination of employees binding or not?
The said advisories are in the nature of guidelines and are not binding on the employers. However, the MHA order issued on March, 29, 2020 has been issued under section 10 (2) of the Disaster Management Act, 2005 for payment of wages on the due date without any deduction, is binding.
Q2. Can an employer terminate/retrench its employees?
The employers may terminate/retrench their employees in accordance with the applicable rules. However, until the nationwide lockdown remains in effect, the Government of India has directed all the employers to pay the wages to their workers on the due date without any deduction.
Q3. What are some of the remedies if an employee is terminated/retrenched?
For an employee who falls under the category of a ‘workman1’, their conditions of service are governed by the Industrial Dispute Act, 1947 (‘Act’). Section 2A of the Act provides that dismissal of an individual workman will be deemed to be an industrial dispute.
The dispute can be settled by way of conciliation or by adjudication and in case the matter is settled by conciliation, the dispute comes to an end.
In case the dispute is not settled, the dispute is referred to adjudication. The process of adjudication is as follows:
The dispute is referred to the Grievance Settlement Authority. In case the decision of Grievance Settlement Authority is not acceptable to the employer and/or the workmen, the appropriate government, by an order in writing, refers2 the dispute for adjudication to:
- Board of Conciliation
- Court for enquiry
- Labour Court (if dispute pertains to matters specified in Second Schedule)
- Tribunal (if dispute pertains to matters specified in Second or the third Schedule)
In case the employer and the workmen agree to refer the industrial dispute to arbitration, at any time before the industrial dispute has been referred under Section 10 of the Act to a Labour Court or Tribunal or National Tribunal.
For an employee who is a non-workman, their conditions of service are governed by the letter of appointment/ employment contract, issued by the employer and the Indian Contract Act, 1872 and the State-Specific Shops and Establishment Legislations as well as the various orders that have been issued by various departments of central and state governments during the lockdown. A non-workman may approach the civil court and/or the court designated under the Shops and Establishments legislation seeking payment of any unpaid dues and/or damages for wrongful termination, if the termination was against the terms agreed by the employer.
Q4. Can an employer reduce the wages of employees?
The employers can reduce the wages of employees. However, until the nationwide lockdown remains in effect i.e. Order No. 40-3/2020- DM-I, the Government of India has directed all the employers to pay the wages to their workers on the due date without any deduction.
Q5. Can the employer defer/avoid payment of bonuses/raises to employees for the current year?
Yes, but while observing the statutory obligations of an Employer under the Payment of Bonus Act, 1965. Payment of bonuses/raises to employees is at the discretion of the employer. However, bonus must be paid to employees who are eligible under the Payment of Bonus Act, 1965.
The Payment of Bonus Act, 1965 regulates the payment of bonus of employees whose wage is below Rs. 21,000/- per month. The bonus provisions under the Act, applies to establishments (including factories) that employs or employed, on any day during an accounting year, 20 or more employees.
Every eligible employee is statutorily entitled to receive a statutory bonus ranging from 8.33% to 20% of the wage. Under the Act, bonus is to be paid to employees within a period of 8 months from the close of the accounting year.
Q6. Should companies provide pay to their employees if they are unable to come (or prohibited from coming) to work due to the COVID-19 outbreak?
So far as the period of lockdown is concerned, until the nationwide lockdown remains in effect i.e. Order No. 40-3/2020- DM-I, the Government of India has directed all the employers to pay the wages to their workers on the due date without any deduction.
After the period of lockdown is over, if the employee avails leave in excess of the leave available to him, the Employer is entitled to deduct wages in accordance with its extant policies. There is no legal bar on the Employer from deducting salary for days of absence (after the lockdown is over) in excess of the days provided for under the relevant policies/contract of employment. However, given the present scenario, it will be advisable for the employer to not deduct wages in the event an employee is suffering from COVID-19.
We will continue to monitor this rapidly developing situation and provide updates as appropriate, including updating this FAQ on an as-needed basis. Make sure you are following People Matters #COVID19 to gather the most up-to-date information. In case you have any questions pertaining to regulatory frameworks around workforce management, drop an email to email@example.com
- Industrial Disputes (Amendment) Act 2010, Notification No. S.O. 2278(E) dated 15.09.2010, Note: Section 2(s) of the Industrial Disputes Act, 1947 defines a workman as 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, terms of employment be expressed or implied and include any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of the dispute. It excludes persons employed in Army/Navy/Air Force/Police and those employed in mainly managerial or administrative, supervisory capacity and drawing wages of more than INR 10,000/-.
- Section 10 of the Act.