The COVID-19 pandemic has been declared as a ‘notified disaster’ in India. Employers and businesses are experiencing critical challenges amid the country’s worst economic crisis. The rapid spread of COVID-19 has further amplified such problems. Global experts have claimed that COVID-19 is here to stay. Although COVID-19 cases in India have been on a steadily decreasing trajectory, it will take time for the economy to recover from the effects of the pandemic and employer-employee challenges may persist for the foreseeable future.
Indian laws classify an employee as a ‘workman’ (blue-collar) or a ‘non-workman’ (white-collar). The labour laws of India makes a distinction between employees based on this classification. The service conditions of a workman are subject to far greater statutory protection than that of a non-workman.
Read on to explore how the pandemic has impacted the relationships of the employees with their employers.
Cost optimization: Reduction in salary, deferred salary & benefits and termination of contracts
The relationship between an employer and an employee comes from a mutual consensus that is cemented in a legal document i.e. a contract. As a consequence of the global pandemic, many employers, often in consultation with their employees, have resorted to reduction of salary, salary deferment, reduction or removal of variable components, benefits, and perquisites that constitute the employee’s cost to the company. It is important to note that a change in the contractually agreed salary of an employee in India requires compliance to be made under applicable laws (for a workman) and the consent of the employee (for a non-workman). For a workman, a salary cut would amount to a change in his service conditions, and before implementing the same, the due process of law is required to be followed. For a non-workman, the employer and employee may enter into a mutual consensus to this effect.
In some cases, the reduction of salary has further led to the termination of employment, where an employee had refused to work at a reduced salary. Further, as businesses have struggled to stay afloat during this period of crisis, many have suspended operations or have permanently closed down. Employers have been forced to terminate employment contracts thereby leading to millions of employees to lose their jobs. It is pertinent to note that in order to terminate employment, an employer has to comply with the terms of the contract like paying notice salary and retrenchment compensation. For employees qualifying as workmen, the due process required under applicable laws as well as requirements under their employment contracts have to be followed for their termination/retrenchment. As many employers are struggling with restricted cash flows, paying a few months’ salary has been a challenge for certain employers during this tumultuous period.
The COVID-19 pandemic has caused many organizations to make the difficult decision of laying-off a wide swath of employees to keep their businesses afloat. ‘Lay-off’ refers to the inability of an employer to provide employment to its workmen on account of a shortage of power, raw materials, accumulation of stocks, break-down of machinery, natural calamity, or any connected reason beyond the control of the management. Besides the temporary discharge from employment, a lay-off does not put an end to the employer-workman relationship during the period of lay-off. Lay-offs are carried out with the expectation that within a reasonable period of time, the establishment would resume its ordinary course of business/ operations, and the employees who have been laid-off will be reinstated to their full rights as normal employees.
Research suggests that victims of forced retrenchment and lay-offs lose their livelihoods, and are prone to stress because of the sudden change in their financial lives and the uncertainty about their future work prospects.
The restrictions that have been imposed in the wake of the pandemic, and social distancing requirements have compelled employers to allow employees to work remotely. The new work from home policy is another challenge being faced by employers and employees in the wake of the COVID-19 pandemic. Since there is no codified law on working from home, it has been a challenge for employers to devise mechanisms for executing an effective work from home culture. Furthermore, although work from home provides flexibility to employees, it also brings with it challenges which might affect their efficiency. Moreover, employees might also feel isolated and long for moments of physical human interactions.
Obligations placed upon employers by numerous government notifications
The obligations placed upon employers by numerous government orders passed and/or to be passed has given rise to another challenge. The Government of India and state governments had passed directions by way of notifications asking employers not to reduce salaries or terminate the employment of employees working in private or public establishments. These notifications of the Central and State Government were subsequently challenged under various petitions before the High Courts and Supreme Court of India.
The Supreme Court of India, in the matter of Ficus Pax Private Limited vs. Union of India & Ors. (W.P. (C) Diary No. 10983/2020), passed an interim order directing that commercial and industrial establishments that are willing, may negotiate the terms and enter into settlements with their employees regarding salary payments for the lockdown period (during which the said establishments were closed) as applicable in the respective jurisdictions. Previously, the Supreme Court in the matter of Indian Jute Mills Association & Anr. vs. Union of India & Ors. (W.P. (C) Diary No. 11281/2020), had directed the appropriate governments not to take any coercive action against private companies that were unable to pay full salary to their employees during the lockdown.
Longer working hours
Another challenge posed by the COVID-19 pandemic is the increase in the working hours of employees. As a part of the efforts of the central government to overcome the economic crisis and implement ease of doing business initiatives, several state governments such as those of Madhya Pradesh, Rajasthan, Gujarat, Punjab, Himachal Pradesh, etc. have passed state amendments to the Factories Act, 1948 (during the lockdown period) to increase the maximum number of working hours per day from 8 to 12, and the maximum working hours per day from 8 to 12, and the maximum working hours per week from 48 to 72. It is important to note that although longer working hours would increase labour productivity, it is an action that shifts the burden disproportionately onto employees.
In the light of the COVID-19 pandemic, as several companies have resorted to longer working days for their employees as discussed above and salary reduction/pay cuts, many employees who were unhappy with the idea of a salary reduction had remained with their employer out of force, holding on to the job because they did not have a choice or an alternative offer because of a bad job market. Such employees tend to remain unhappy because of their inability to strike a positive chord with the management, which adversely impacts efficiency and productivity.
Unprecedented global events like the COVID-19 pandemic have a disastrous impact on public health and the economy. Economic downturns of this scale are marked by business disruption, job cuts, and negative growth. However, when the trigger for the downturn is brought under control, economies experience a sharp rebound, leading to a good economic cycle marked by economic growth, better employment opportunities, and a boost in demand. Therefore, during a tumultuous period or economic disruption, employers and employees need to perform a balancing act. Employers should consider desisting from retrenching employees, and employees should also understand that employers are facing a cash flow crisis, which would in all likelihood be correct when business normalises and the economy re-enters the growth phase.