Covid – Kurukshetra – Fate of the Industries

On 11th March 2020, World Health Organisation, declared Novel Corona virus Disease (“COVID-19”) outbreak as a pandemic and reiterated the call for countries to take immediate actions and scale up response to treat, detect and reduce its transmission.

The Prime Minister’s Office, Group of Ministers, Ministry of Health and Family Welfare and Cabinet Secretary are closely monitoring the situation. The Government has invoked powers under the Epidemic Diseases Act, 1897 to enhance preparedness and response efforts. With COVID-19 being declared a notified disaster, the “State Disaster Response Fund”, constituted under the Disaster Management Act, 2005, is now available with state governments for response measures.

The pandemic wreaked (and is continuing to wreak) havoc across the world – spreading more than most of the deadly diseases like Ebola and SARS/ MERS – till date killing over 75000 people as of 2:00am CEST, 8th April 2020. With the outbreak of COVID-19 industries, manufacturing units, service establishments, commercial establishments, professional set-ups, etc. also took a toll owing to the government lockdown across continents.

The Prime Minister of India on 24th March 2020 announced a complete nationwide lockdown for a period of 21 days with effect from 25th March 2020 to contain the pandemic. With the announcement for lockdown, certain requests were made to employers not to lay off workmen and employees, give them their full dues and ensure that the lockdown doesn’t adversely impact them.

The Central Government also instructed State Governments to ensure employers are issued necessary advisories. State Governments such as Karnataka, Maharashtra, Uttar Pradesh and Himachal Pradesh have issued orders/ directives instructing “employers” to ensure that no wage reduction, (in some cases forced leave) and termination of workmen and employees are done on account of the COVID-19 lockdown situation.

List of few of the state regulations, in brief, is captured below for the readers understanding:

Similar notifications have been issued by the Government of Delhi, Himachal Pradesh, Madhya Pradesh, Jharkhand, Gujarat, Haryana, etc. to safeguard the employees/ workmen.

The lockdown affects not only employees but also organisations. Retail – whether of services such as beauty, healthcare, etc. or products (barring groceries and medical supplies) – has come to a standstill. Real estate sector is heavily affected, be it in construction or sale of real estate. Essentially any non-tech enabled and non-tech-based organization has come to a naught and are in a no work – no income phase.

Rights of employees – Obligations of Employers during the lockdown

Leaves of employees/ workers are either governed by the Shops and Establishment Act or the Factories Act or the Industrial Employment Standing Orders. These legislations however do not specifically capture provisions with regards to leave during a natural calamity, Act of God or epidemic or pandemic situations. Hence, one must turn to the notifications, directives or advisories issued by the Central Government and the various State Governments in this regard.

Key Principles:

• Work from home should be provided to the extent possible as an option to all employees.
• Employees who are unable to report to work on account of lockdown of establishment to be considered to be on duty.
• No employer can compel its employees to utilize their accrued annual leave/ sick leave during the COVID-19 lockdown.
• Full wages to be paid to all employees/ workmen and on time.
• Workers to include contractual, outsourced and casual workers as well.

Special Provisions:

Karnataka Government was the earliest to issue a circular to employers requiring them to grant 28 days paid leave to employees (covered under ESI) infected/ suspected of COVID-19, upon submission of relevant declarations. The employees who are not covered under ESI shall avail 28 days of paid sick leaves along with other leaves as per Section 15(3) of Karnataka Shops and Establishment Act, 1961.

The Government of Uttar Pradesh has released a notification (on March 20, 2020) requiring the employers to grant 28 days paid leave to employees affected by COVID-19, upon submission of medical certificate at the time of re-joining the duties after recovering from the same. The notification further states that all employee/ workmen of the shops and commercial establishment or factories which have been closed temporarily by the orders of the State Government or the District Magistrate shall be provided with paid leaves by the employer for the period of such closure.

The Government of Himachal Pradesh vide its order (on March 21, 2020) stated that the wages/ salary/ emoluments of the employees/ workmen not reporting to work shall not be deducted and they should be treated as “on duty”. Employers are therefore obligated:

• Not to terminate their employees/ workmen on account of and during lockdown.
• Not to deduct wages of employees on the pretext of non-attendance.
• Not to let go of contractual labour.
• Not to force employees to go on paid or unpaid leave.

Fate of Managerial Staff

Managerial staff who does not fall within the ambit of the definition of workmen under most directives/notifications would get covered under the term “employee” and would also be eligible for the above listed rights. It is possible that many such staff would not have received directions to work from home.

It goes without saying that in light of the above, the managers/ supervisors who are beyond the definition of workmen would need to be paid during the period of the lockdown, even if they are not directed to work from home. The general employment-law principle is that  employees should be paid their salaries if they are ready and willing to work, irrespective of the employer being unable to provide work or due to the Government-mandated lockdown, when all the work is temporarily suspended (except essential services).

The Central Government has issued a circular stating that if the place of employment is made non-operational due to COVID-19, the employees of such unit will be deemed to be on duty. The Ministry of Home Affairs (on March 29, 2020) issued a notification to all State Governments and Government Ministries/Departments requiring employers of all industries, shops and establishments to pay wages to all workers without deductions, during the period of the lockdown. Any non-compliance of this notification shall attract penal provisions under the Disaster Management Act, 2005 leading to imprisonment of 1 year.

How  organisations should go about work from home policy?

Employees can work from home during the lockdown to the extent that the nature of their work allows for the same. Work from home is not regulated or governed by any legislation, hence, the employment laws that would be applicable to an employee when they are working from the employer’s establishment would continue to apply. The work hours would continue to apply to employees.

Measures that shall be undertaken to aid work from home for employees:

• Provide laptops/ desktops to effectively work from home.
• Ensure effective communication amongst employees. Any decisions to be communicated to the employees should be carefully explained and actions taken uniformly as a matter of policy.
• Make the employees aware about the confidentiality obligations.
• Pay wages on time.
• Ensure that effective IT tools and applications relating to sharing and storing of files, data, documents, etc. are in place.
• The employers shall take additional data security measures to ensure that their infrastructure and resources are protected at all times.

To aid work from home, Department of Telecom (“DoT”) issued a notification dated 13th March 2020 which temporarily liberalises conditions stipulated under the “Terms and Conditions – Other Service Provider (OSP) Category” with respect to “Work From Home”  for a period up to 30th April 2020. In case of a violation of the Work from Home facility by any agent/ employee or OSP entity up to 30th April 2020, the OSP holder shall be subject to a penalty up to INR 5 lakhs (approx. USD 6,700) per Work from Home location, without specifying any aggregate cap. Additionally, DoT may also cancel the registration of the OSP entity. Exemptions granted pursuant to this notification are:

• The notification exempts the security deposit (furnished in the form of a bank guarantee) and execution of standard-form agreement with DoT up to 30th April 2020.
• Requirement to seek secured VPN from telecom service provider i.e. PPVPN is exempted.
• The notification clarifies that no prior ‘permission’ from DoT is required for Work from Home facility for employees of entity registered as an OSP with DoT.

In case the employee is unable to complete or perform the assigned work, the employer can take actions against such employees.

Most affected Sectors

There is no doubt the industries most affected right now are tourism, travel and hospitality. Indigo, GoAir, Oyo, Makemytrip and the list goes on have announced all kinds of measures to deal with this situation.

Other less talked about industries that have taken a major hit are healthcare, manufacturing, retail, real estate and professional services.

Migrant workers and daily wagers are stuck with nowhere to go which sparked the hordes of people making their way home – of which the readers must be aware.

The government has come up with certain measures for such workmen:

• The Ministry of Labour and Employment (on March 24, 2020) issued an advisory under Section 60 of the Building and Other Construction Workers Act, 1996, in terms of which all state governments/union territories have been advised to transfer funds in the account of construction workers through Direct Benefit Transfer (DBT) mode from the Cess Fund collected by Labour Welfare Boards under the Building and Other Construction Workers Act, 1996.

The notification of Ministry of Home Affairs (on March 29, 2020) has directed State/ Union Territory Governments to ensure adequate arrangements of temporary shelters, provision of food, etc. for such migrant workers and daily wagers. The employers in the Industry or in the shops and commercial establishments shall pay their workers on the due date, without any deduction.The notification has also directed landlords to refrain from demanding rent for 1 month from workers (migrant workers or otherwise) living in rented properties.

Way-s out for Corporates

It is a very hard bargain for employers and an unfortunate situation today. On one hand viability and continuity of business needs to be taken care of and on the other hand protecting that underprivileged work force.

If the former is the premise, it may mean looking at reduced real estate costs and also letting go of excess labour. Unlike the IT Industry where all or most of the work can be done remotely, in most other type of organisations, excluding professional services, which are labour intensive such as retail, healthcare, building and construction, real estate, telecom, airlines, tourism, hospitality, etc. it may not be prudent to keep all the excessive employees.

However, in light of the strict directives issued by the Government, one needs to assess what can be done and what may be planned for the time when the lockdown mandated by the Government is lifted. The first thing to remember is that any action that is taken during the lockdown and which is something that is intended to be reversed post the lockdown, will be frowned upon. Therefore, any business continuity plan or any business related decision of trimming the excess fat needs to be done from a long term perspective. Please note however that in a recent directive the Ministry of Home Affairs has directed that due dates should not be missed. Hence deferment of payments would not be allowed.

Having said that, it may not be possible to ignore the requirement of terminating additional employees that would have been required for, say expansion plans, etc. because post pandemic, most of the companies will go into a consolidation phase. In such a situation a plan of 6-10 months needs to be drawn up and according to the plan, in a phased manner, actions needs to be taken. It goes without saying that the top management and the middle management and the non-managerial and supervisory employees which is above the grade of an office accountant or in the case of an IT company, the 2^nd or 3^rd level like a project team leader, etc. or any employees who are above that cadre and above a certain pay grade, need to be targeted first.

It would not be prudent as a business continuity plan to terminate or to reduce wages of “workmen” as defined under various industrial laws including the Industrial Disputes Act, 1947 and the Minimum Wages Act, 1948. The HR of each of these companies will have a list of such workmen/ employees and the management needs to sit down and take a stock as to which employees are at that pay grade or at that level and which workmen/ employees are not. It is important to note that the Order issued by the Government of Maharashtra, Industries, Energy and Labour Department (on 31st March 2020) includes casual and temporary workers too. In many other parts of the country also, the advisories issued, specifically mention outsourced employees. So therefore, it is very important at this juncture, to relook at all service contracts and to the extent that the contracts permit suspension or deferment of payments. This may be permissible because in the case of a contract/ outsourced employee, there is another entity that has the primary obligation to make payments to the employees. Please note that under the regular labour laws, all principal employers are ultimately responsible for non-payment of wages of their contract/ outsourced employees.

Key takeaways for any employer

The law doesn’t differentiate between small and big or organized and unorganized sector with respect to the Covid-19 directives against safeguarding employee rights. While it is all well to applaud large IT companies who have offered work from home, the real brunt of the directives will be borne by family businesses, SMEs, start-ups and proprietorships.

It is easier said than done, but companies should avoid knee jerk reactions at this stage. It is very important to also note that most employees and other workers have access to the Government directly through twitter, other social media platforms, etc. We have (as a firm) seen a lot of such twitter handles, bursting with messages to the Government, to take cognizance of certain retrenchments, lay-offs or reduction of wages or forcing of employees to go on unpaid leaves and those are all being responded to.

In sum

This being an unprecedented situation, it is not known today, as to how Governments will respond, and whether any exceptions will be made and if made in what cases to expect these exceptions. It is clear that in any economic downturn or recession (which is where the global economy is headed right now) the worker force is the most impacted – given that theirs is the first job to go.

As far as the Disaster Management Act, 2005 is concerned; it only deals with imprisonment for not following orders which will affect lives. The question of removal from work or reduction of wages tantamount to that cannot be answered today. It will depend a lot on how this pandemic progresses and how the Governments respond in future including whether or not the present lockdown is extended.

Having said that, it would really help at this stage, if collective lobbying is done with various State Governments to deal with this situation. As you can see even the top brass of our executive branch has forgone his salary and the Government of Maharashtra has reduced salaries and wages as well. These are measures being undertaken across the board, so it may be good for industries to get together and lobby to the Government on a consistent and efficient basis, at all times ensuring that the relief sought, does not in any manner, impact the lowest rung of the citizenry.

Time will tell what is the impact of pushing organisations to make payments today? Will such short term measures affect the long term viabilities of businesses making people unemployed in the long run? What other benefits – such as rent waiver, relief in respect of direct / indirect taxes etc can be offered to businesses that are today following directives so that such businesses stay afloat. Much is awaited from the Government as a holistic action plan.