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IMPACT OF COVID-19 ON EMPLOYMENT

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Ankita Kashyap - Counsel, Rajashree Ram - Senior Associate, Swapnil Gupte - Senior Associate, Economic Laws Practice, Mumbai

06-Apr-2020

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COVID-19has severely impacted countries world over resulting in complete lockdown thereby impacting not only the businesses but also all aspects of human life.

COVID-19has severely impacted countries world over resulting in complete lockdown thereby impacting not only the businesses but also all aspects of human life.

 

As a result of lockdown, most of the companies and businesses have initiated a ‘Work from Home’ (WFH) policy to enable business continuity in these extenuating circumstances.

 

Although WFH seems like a workable solution, there are various businesses and organizations where WFH policy cannot be implemented. To illustrate, a factory or a manufacturing unit, cannot operate without the physical presence of the employees. As a result of a lockdown, the organizations and businesses will invariably be affected as there will be no business activity, production or otherwise thereby resulting in nil income. However, employees at such organizations will still be needed to be paid by the employer. The Central Government has issued a circular which states that if the place of employment is to be made non operational due to COVID-19, the employees of such unit will be deemed to be on duty. Further, the Ministry of Home Affairs issued an Order dated March 29, 2020 under Section 10(2)(l) of the Disaster Management Act, 2005, (MHA Order)  to all the State/Union Territory Governments and State/Union Territory Authorities inter alia requiring all the employers be it in the industry or in the shops and commercial establishments, to 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.

 

With no manufacturing or production, businesses will be staring at mandatory overhead costs such as salaries, taxes, etc., and no income to offset the same. This may constrain the employers to resort to drastic measures such as lay off or retrenchment or termination of employees. It is prudent that all directives/orders issued by the Central Government and various state governments be taken into consideration before initiating any such measures.

 

Diametrically opposite to this situation is the issue which is being faced by essential service providers who are exempted and are expected to continue manufacture and production activities despite the lockdown. These organizations are facing another issue on whether they can compel their employees to come to work during the lock down period. It may be pertinent to mention here that in the case of Hindustan Aeronautics Workers ... vs. G.M. Hindustan Aeronautics Ltd., (1999 (4) ALD 435) (“Hindustan Aeronautics”), stressing upon the importance of the life and safety of workers, it has been observed by the Andhra Pradesh High Court as follow:

 

The learned Counsel for the respondents contended that the management cannot be expected to bear the loss due to the absence of the workers. If the same logic is applied, the workers cannot be expected to reach the place of work in the face of grave threat to their safety, security and life. Even if it is true that the Standing Orders nowhere prescribed duty on the management to pay wages to the workers on such occasions, the duty of any welfare State cannot be ignored. The welfare-State cannot force the labour to work under grave threat of security.”

 

Therefore while there is no specific provision that restricts the employer to call certain employees identified as critical/essential resources required to be available at workplace during the period of lockdown, upon a holistic reading of the various government directives/orders and judicial precedents, it may be prudent not to compel employees to come to work if they are reluctant to do so.

 

Various questions are also posed before businesses and organizations as a consequence of this lockdown. One such question is whether organizations can advise employees to avail personal leave during the lock down period. In light of the aforesaid MHA Order and the Hindustan Aeronautics judgment, it may not be prudent to advise employees to avail personal leave during the lockdown period. One could argue that an employee being absent from work in the present circumstances would be deemed to be on duty and absence from work is attributable to the grave threat to life and safety of an employee - an employee would not have otherwise voluntarily remained absent from work in ordinary circumstances.

 

 

Employers are also keen to understand whether the orders and advisories issued by the government are only for workers or all employees. In case of the MHA Order, although a technical contention can be raised that the MHA Order is applicable only to ‘workers’, it is unlikely that such an argument would be acceptable to the authorities, if any employee contests violation of the same in the court of law. 

 

Businesses are currently walking a very fine line. On one hand they need to protect their employees, on the other they face the looming threat of complete shutdowns. Given this situation, it is imperative that the Central and respective State Governments come up with stimulus packages for businesses and organizations. The stimulus packages could include:

  • Reduction in tax liability particularly for sectors which are most hard hit by COVID 19 such as small and medium enterprises, services, exports;
  • Interest free loan which could enable small and medium businesses and organizations to not only pay the salaries of their employees but also other operating costs.

 

One hopes that if these stimulus packages are announced it will help businesses to sustain and ultimately protect livelihoods.