Retrenchment and salaries cut by employers: legal remedies available to

employees

Introduction

COVID-19 is severe acute respiratory disease caused by the infection from corona virus which was
originated from Wuhan province in China and has become a global pandemic. This virus has taken hold all
over the world and has caused serious economic repercussions. Indian business has been seriously affected
as a result of this virus. The Indian Government has announced lockdown on 24 th of March and since then
all the economic sectors which are not providing essential services were put on hold. Government has
closed schools, restaurants, gyms, offices, factories, and every other places of public gathering to stop the
spread of the virus. This has impacted not only the economy but also the workers across the country. The
Indian businesses are experiencing various unprecedented issues including employee related issues.

Employees are the most valuable asset of India and the current situation is an inevitable fate that befalls the
employees. Their jobs are at risk, and there are chances that outstanding entitlements will never be
recovered or that payments will take a long time to be received. The working class has taken a major hit,
with 12 crore blue collar workers having gone without pay so far 1. With this note, this article will be
providing some common issues arising because of the novel coronavirus which may help employee in
taking concerned approach while dealing with employer in matters related to employment.

Relevance of force majeure in current scenario

Force majeure is a French phrase meaning a “superior force” and it has been defined by the Black’s Law
Dictionary as “an event or effect that can be neither anticipated nor controlled. It is a contractual provision
allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an
event that the parties could not have anticipated or controlled”. Force majeure is the event that is not
foreseeable and hence, it cannot be controlled. The rationale behind force majeure is that there will be an
event that unforeseeable and cannot be addressed, and none of the parties are responsible for that. In that
situation, it is not only reasonable but equitable as well to either suspend the obligation or extend the
deadlines for contract fulfilment.

In the current situation, force majeure principle cannot be made applicable in case of employers where they
are bound to pay salary to their employees. Force majeure principle are only applicable in cases of contract
between parties but employment is made through agreement and the employment will only be as per the
terms and conditions of agreement.

However, one of the contentions is that COVID-19 being a force majeure event is an unforeseen event,
similar to an act of God explained under the Indian Contract Act and thus any action taken as a
consequence of the same is unintentional and prompted by circumstantial necessities 2. The intention
behind this is to provide flexibility to companies so that they will be able to formulate their own policies to
1
ET Online. (2020, April 28). Lockdown, Day 35: A look at the road ahead. Retrieved from Economic Times:
https://economictimes.indiatimes.com/news/politics-and-nation/lockdown-day-35-how-the-road-ahead-looks/articleshow/
75428823.cms?utm_source=ETMyNews&utm_medium=ASMN&utm_campaign=AL1&utm_content=2
2
COVID-19 and Termination of Employment: A Labour Law Perspective. (2020, April 2). Retrieved from Simpliance:
https://www.simpliance.in/blog/covid-19-and-termination-of-employment-a-labour-law-perspective/
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deal with the challenges posed by the economic side-effects of the crisis. However, the same is being
misused by various institutions which are terminating employment en masse. The benefit of force majeure
should be given only if there is some genuine cause and not to those who are using it for their own benefit.

Types of Employment

1. Public Service: Public Services are governed by the State or Central Government or DOPT 3 Guidelines
or other codified laws. When it comes to employment, a due process has to be followed. The payment
of salary of the workmen in public services is secured by due process followed and the employer is
bound to act as per statutory or constitutional obligations. However, due to current situation, owing to
revenue deficit, several State Governments have deducted the remuneration of employees.
2. Private Service:
i. Workmen including contract workmen, casual workmen, migrant workmen, including sales
promotion employee as defined under Section 2(d) of Sales promotion Employees (Condition of
Service) Act, 1976

The Ministry of Home Affairs issued an order dated 29.03.2020, under which a National Executive
Committee under Section 10(2)(I) of the Disaster Management Act, 2005 and issued an order which
included payment of wages by the employers to employees of any industry, enterprise, commercial
enterprise. Section 51 of Disaster Management Act, 2005 penalizes those who are not following the orders
or directions.

ii. Employees drawing more than Rs. 10,000 per month

Employees having salary of more than Rs. 10,000 per month, neither comes under the definition of
workmen nor governed by any legislation relating to labours. These employees are governed by employer-
employee contract agreement. If the agreement consisted of any clause relating to force majeure, then such
clause will come into picture. If there is no mention of such clause in the agreement, then Section 56 of the
Indian Contract Act, 1872 will be applicable. Section 56 talks about doctrine of frustration which requires
the discharge of contract by the employer because of the impossibility of completion of act agreed to be
done.

Work from Home

The concept of work from home is not at all new in Indian business, however the statutes are about the
concept. There is no such statute or provision talking specifically about the concept and to regulate it.
Accordingly, the employers have over the decision of either allowing the employees or not allowing to
work from home and they have the liberty to provides the guidelines to the employing working from home
on their own will. The statutory provision available in respect of working hours, overtime payment, etc. are
applicable on the employee who has been working from office premises.

Due to COVID-19 and to promote social distancing, central government have issued various advisories for
promoting work from home. Due the imposition of lockdown, all the commercial and industrial
establishments, not engaged in providing essential services, have to be closed. However, it is not necessary
for the employers to close all the operations and are free to provide employers work from home, if
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Department of Personnel and Training
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possible. Requiring employee to work from home will not trigger any cutting of salary as even the office is
closed that doesn’t mean, employees are not working also, closure of office doesn’t mean declaration of
holiday.

There are establishments which cannot provide work from home opportunities to their workmen due to the
nature of their work, in such situation case of Bharat Electronics Limited Bangalore vs Industrial Tribunal 4
will be applicable. In this case, it was held that an allowance which was earnable only by active serving
was not an allowance which would form part of wages 5. Therefore, it can be said that if establishment is
incurring losses and is not able to fully remunerate its workmen, then in such situation, the employer can
pay subsistence allowance to the workmen, as it is clear that subsistence allowance is an allowance which
from the term of the employment flows as not contingent on actual working6.

Leave Management

Many employers have implemented the work from home wherever there are possibilities but there are
various establishments which has not allowed work from home because of their nature of work. During the
lockdown when establishments are closed, the absence of employee from workplace cannot be adjusted
either by paid or unpaid leaves. However, if the employer is voluntarily closed in absence of means to
continue work from home, the employers and employees can mutually agree on adjustment of paid and un-
paid leaves7.

In case an employee is infected or sick and wanted to take sick leave, the prescribed number of leave
provided under Employment Act may vary from 7 to 12 days depending on the location of the
establishment and based on the number of COVID-19 infected cases. If the number of leaves is more than
the prescribed leave, then the casual leave or earned leave can be utilized for the same. ESI Act provides
that sickness leave can be of longer duration, if necessary. In case, an employee has to administer self-
quarantine as a consequence of discharging his official functions, such employee should be provided paid
leave. However, if the employee does the same for personal reasons, they can be required to utilize their
outstanding leave. Further, the Employees Provident Fund Scheme, 1952 provides that withdrawal of up to
the amount of basic wages and dearness allowance for three months or up to 75 per cent of the amount
standing to member’s credit in the EPF account, whichever is less, in the event of an outbreak of epidemic
or pandemic, will also help the workmen to sustain8.

Lay-offs

Lay-offs has been defined by Industrial Disputes Act as the failure, refusal or inability of an employer on
account of the shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of
machinery or natural calamity or for any other unconnected reason to give employment to a workman
whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched 9.
In cases of lay-off, the employer continues to give employment to the workmen but the payment is
4
1990 SCR (1) 971
5
Bharat Electronics Limited Bangalore vs Industrial Tribunal, 1990 SCR (1) 971 (Supreme Court of India 1990)
6
Act, P. o. (1936). India Patent No. Section 2(i)(vi)
7
Rudra Srivastava. (2020, March 30). COVID-19: Our Take on Employment Issues in India. Retrieved from Singhania & Partners
LLP Solicitors & Advocates: https://singhania.in/employment-issues-in-india-approchescovid19/
8
Employees Provident Fund Scheme, 1952
9
Act, I. D. (1947). India Patent No. Section 2 (kkk)
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reduced. The eligible employee can claim 50% of the salary and dearness allowance from the employer. If
the lay-off period is of more than 45 days or more, then the employer can proceed for retrenchment. the
compensation paid by lay-off is adjustable with compensation payable for retrenchment.

Retrenchment/Termination

Employer has the option of retrenchment/termination that they can provide to the employers but the same
will be treated as termination for convenience and all the necessary processes like notice period, intimation
to government authorities, payment of retrenchment compensation, payment of gratuity, leave encashment
etc. will need to be completed. There are a lot of advisory from government against the termination of
employees due to COVID-19. The option of retrenchment/termination should be considered as last resort.

Official Travel

Any kind of domestic or international travel is prohibited because of the implementation of lockdown. In
case any employee has travelled for his official functions and is unable to return home, the employer
should provide for safety and necessary accommodation requirements. Government of India has cancelled
issuing of all visa, however, if any overseas employee is already in India, the person can continue to stay in
the country till balance duration of his visa. In case, their visa is expiring during the lockdown period, they
should immediately contact the nearest foreign resident registration office to seek support. Indian employer
is supposed to provide assistance, required for the same.

Compensation to Infected Employees

Employers are bound to pay compensation to their employees in case they get injured (includes both partial
and permanent disablement) or die due to accidents arising in the course of employment. Accordingly, if
COVID-19 infection was contracted during the course of employment and it arose out of employment, the
employer should be legally bound pay compensation to impacted employees. The obligation to pay
compensation also depends on other factors like state of employment.

Government actions so far

As we already know that different states will have different types of strokes of unemployment. The central
government has directed all states to mandate that employers in all industries, companies, and even shops
must pay their workers without any deduction during the period of lockdown. States have issued their own
rules and varied versions of this direction. Both central and state government has relied on the Epidemic
Diseases Act, 1987 or Disaster Management Act, 2005 to issue directions to the private sector. Taking
directions from the central government, Delhi, Telangana, Haryana and Puducherry have issued mandatory
directions to private companies to pay wages or salaries in full to all workers and employees during the
lockdown period. Others, such as Karnataka and Maharashtra, have issued only advisories to employers for
not terminating or deducting wages/salaries of workers or employees.

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Conclusion

Now this is a fact that the New Novel Coronavirus has its impact all over the world and it's escalate has
forced the government of various countries to impose lockdown to prevent its further spread. The
lockdown might be effective to safeguard the peoples from being affected by this Virus but at the same
time, it is going to impact disastrously to the world economy as well as to the national economy and
mainly the workforce is going to be on the danger line. The workmen generally belong to either below
poverty line or the lower strata of the society, they might be the only breadwinner for their family. In such
situation, the loss of job or deduction in salary will left them with no other alternative rather than to die of
hunger.

In these scenarios, for safeguarding the job security and losses of employees our Government should focus
on giving relief package for private sector industries if not then must offer interest free or low interest
loans so that they pay salaries to their employees.The government can also relax norms to allow employers
to catch up with lost time and productivity in the future, such as reasonable relaxations in overtime limits
and associated payment obligations.These steps will forbade the employers from hampering their
employees economically.

Also as we have been taught from the history that whenever in majority the commoners suffers because of
unemployment and hunger, civil war and protest on a large scale took place.Our country's population is in
billions and the workforce is also immense, so the government as well the employers should have to
understand the barbaric economic situation that is arising and also the ugly side of the story if the
necessary decisions for safeguarding the employees has not been taken.

The blooming narrative of the scenario is that, there are various laws and various advisories from
government preventing the employers from terminating employees from their job but as far as India’s
concern the people has always been united by their mutual love and this is the time of showing that love
towards each other. The employer should understand the need of workmen and should not wait for the
government to make any law forcing them to act in certain manner and also the government should take
suitable decisions so that the employers’ existence won't go on stake.

Lastly all the concerned authorities have to understand their duty towards their employees/workmen
otherwise whenever injustice happens, law strikes to prevail Justice.

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