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Author: Mansi Jain

Sharda University, Uttar Pradesh


During this pandemic, the Government of India declared a nationwide lockdown in India on March 25, 2020. The Economic Impact of the 2020 Covid-19 has been largely disruptive it affected the whole nation. India’s growth went down to 3.1% according to the Ministry of Statistics. The lockdown was initially expected to last until April 14, 2020 but has been extended until May 3, 2020. The Country went through 4 phases of lockdown and still, no-one can expect when the country will come back to its original functioning because the situation is going worse only. In addition to having an overly critical and devastating situation not only it impacted the lives of people world over but also has had a great influence on the companies and organisation whole private and commercial sector. The Government ordered all private and commercial establishments to shut down, with certain exceptions. While several companies and their employers have been providing work from home facilities to their employees during this lockdown period, due to the uncertainty over the scope of the Covid-19 public health emergency and the impact on the economy, employers started coming up with various options for saving labour costs for business viability reasons, including by reducing salaries/wages of their employees and /or terminating their employment, asking the employees to go on pay leave / subcritical leave etc. However, at the same time, there is also a necessity to ensure protection for their personnel during this hard time while also equally safeguarding and balancing their interests.

Termination of Employment

Several employees were complaining of termination of jobs due to coronavirus, which is against the order of the Ministry of Labour. The Ministry of labour has issued an advisory dated on 20 March 2020 ( the Advisory) according to which all employers of all public and private establishments were advised not to terminate the employment of any employees ( both casual or contractual workers) on the pretext of the prevailing conditions. The Ministry of Labour and Employment advises all employers to support their employees and workers. But the main point here is that the advisories were not like an order under any particular statutes and even it was unclear whether the failure non-compliance with this advisory will result in any punitive action being taken against the employer.

Additionally, the PM of India in the Official Gazette No. 31102 and dated April 17, 2020, has requested employers are prohibited from terminating employment agreements for three months. Employment may be terminated if required following the employment agreements/policies of the company. However, termination of employment in an industrial establishment would require compliance of IDA. Under this the employers are required to provide one month notice in advance or wages in lieu. After April 17, 2020, the employer can completely or partially send the employee on unpaid leave for a maximum period of three months. The fact that the employer sends an employee on unpaid leave does not give the employee the right to terminate their employment agreement based on just cause. The President has been empowered to extend the periods of termination prohibition and maximum unpaid leave for up to a total of six months.

Salary Reduction

In this context, The Ministry of Home Affairs (MHA) has taken an initiative through an order dated March 29,2020, among other notifications/guidelines issued by other departments, directing all public and private establishments to make full payment of wages to their employees and workers (both permanent and contract) without any deduction till the duration of lockdown without any deduction. Any non-compliance of the measures mentioned in the order would be punishable under the Disaster Management Act, 2005 with imprisonment of up to one year and/or fine. The said order has been challenged before the Supreme Court and has resulted in several public interest litigation (PIL) filings both challenging the legality and validity of the order. Generally, three categories of PILs were filed before the Supreme Court.

PILs by Employers, by exempt organisations (being exempt, as “essential goods/services”) and by Employee bodies.

Firstly, PILs by employers many companies like: Nagreeka Exports Ltd. vs. Union of India, Ludhiana Hand Tools Association Vs. Union of India, Ficus Pax Pvt. Ltd. vs. Union of India and Twin City Industrial Employers Association vs. Union of India challenged the order according to a writ petition filed in the SC by stating that it is beyond the scope of powers under the DMA, discriminatory and violative of the Article 14 and 19(1) (a) of the Constitution, in addition to being illegal, unethical, improper and illegitimate. While taking the consideration of Article 14 the petitioners argued that the order of MHA upholds the rights of employees only while ignoring the rights of employers this shows that there is no intelligible differentia or reasonable classification between workers and employers because the economic rights of both groups have been affected by the Pandemic. It contravenes the Industrial Disputes Act, 1947 (IDA, a special employee welfare legislation) which specifically contemplates the right to layoff workmen due to natural calamity. The petitioners were heard on 27 April 2020 in which Supreme Court allowed the Central Government two weeks' response time and directed it to "place its policy" on record on the implementation of the Order, but did not address the plea for interim relief and stay that would protect employers from paying full wages during the pendency of the PIL.

Secondly, PILs by exempt organisations in which certain businesses were permitted to continued operations during lockdown ( as essential goods/services) have raised challenges to the order itself is a challenge and violative of Article 14 and 39 of the constitution, specifically the principles of "equal work, equal pay" and "no work, no pay”. The Disaster Management Act,2005 (DMA) does not empower the government to enforce financial obligations upon Private establishments to pay wages during a lockdown. It was also concerning that the obligation of the state to provide financial assistance to workers during the lockdown, as is the practice is several other countries. The Order violates Article 300A of the Constitution by interfering with and dispossessing the employer of his property other than by procedure established by law. As the contract between the employer and contract labour is private contract hence the government cannot legally override and terminate the contracts. The petitioner should be entitled to lay-off and retrench workers under the provisions of the IDA in the event of a natural calamity.

Thirdly and lastly the PILs by Employee bodies wherein the multiple journalist organisations moved the PIL against media houses and trade bodies for wage cuts, unpaid leave, layoffs and closure of business in violation of the Order and labour ministry advisories in support of the Order. The PIL particularly cites that the media industry is exempt from the lockdown as an "essential service" and journalists are eligible to work through the lockdown. It also claims violation of the retrenchment and business closure procedure under the IDA (which requires government approval, retrenchment compensation etc.), the Working Journalists Act, 1955 as well as their contracts of service. The matter was heard on 27 April 2020 and still pending. Legality and the validity of the order were questionable from a constitutional perspective. It was issued without inviting objections and not in a fair, reasonable and transparent manner, and the government accordingly acted unilaterally, discriminatory, potentially arbitrarily and violative of fundamental rights to equality, trade and property without following the principle of natural justice. The petitions are still pending in the Courts.

In the meanwhile, the Central Government has extended the lockdown till 17 May 2020, continuing the effect of the Order dated 29.03.2020. Further, penal consequences are also being enforced against employers for non-compliance of the said Order under section 188 IPC, 1860. This section provides penalties for disobeying any regulation or order made under the Act (Disobedience to order duly promulgated by public servant). Similarly, the Supreme Court has not granted any stay over the said Order, this article seeks to analyse the Order’s impact in the context of the prevailing labour laws in India.


Within the scope of the measures taken in response to COVID-19, significant changes have been made to the prohibition of termination, unpaid leave application, salary support, short-term working allowance application and extension of certain periods.

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