Supreme Court: Employers and Employees to Negotiate on the Matter of Payment of Wages

On March 29, 2020, the Union Ministry of Home Affairs (MHA) issued a notification to the effect that employers must pay wages to their employees so as to help them tide over the economic hardships which arose on account of the COVID-19 lockdown. The notification also mentioned legal consequences upon the employer in the instance of their refusal to follow through. Pursuant to the various petitions filed challenging the notification, on May 15, 2020, the Supreme Court stayed the MHA order and admonished the Government for shifting the burden responsibility to the employers instead of taking any active measures to provide financial assistance to the employees.

The petitioners had contended that the MHA order was arbitrary, illegal, irrational, unreasonable and contrary to the provisions of Article 14 and 19(g) of the Constitution. They argued that, if necessary, the ESIC funds could be used to pay wages. They emphasised that the Government’s argument that the order had the full force of Section 10 (2) (1) of the National Disaster Management Act, 2005, is unfounded, because the mandate of the Section is obligatory upon the Government, and not private establishments, to allocate funds for emergency response, relief, rehabilitation and mitigation efforts. The Government made the case that the March 29 order was intended to take effect temporarily to mitigate the financial hardship faced by the workers employed either contractually or causally.

The Court ruled that no coercive action may be taken against employers for refusing to abide by the March 29 notification which stands cancelled. It said that the lockdown measures initiated to contain the pandemic had an equally adverse effect on the employers as well as the employees. Since all the employers don’t have the financial bandwidth to pay the wages of their employees, a middle ground needs to be attained between both parties in the interest of the economy. The State is under an obligation to ensure smooth running of industries and therefore, should assist in the process of settlement by facilitation through state labour departments. Hence, the dispute in the matter of paying wages for the 50 days during which the MHA order was operational, may be accordingly conciliated and sorted out for the greater good of the business environment.

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