Covid-19: Order Asking Firms To Pay Wages During Lockdown Stands Withdrawn

The Ministry of Home Affairs' recent notification suggests that the government's direction to private sector on wages stands withdrawn. On March 29, the government had mandated employers, including shops and commercial establishments, to pay wages to their employees without any deduction during the period of lockdown.

But on Monday, the home ministry issued an updated notification that says only the directions explicitly mentioned need to be followed. And that all earlier orders issued by the National Executive Committee under the Section 10(2)(I) of the Disaster Management Act, 2005, will cease to have effect. The March 29 order falls under this category.

In the absence of any specific relief to private sector on the wage burden, employers had challenged the constitutional validity of the earlier order. Experts opined that the directives on payment of wages amounted to overreach of authority by the government.

Meanwhile, the Supreme Court restricted the government from taking any coercive action on this issue. This was in response to a petition filed by the Hand Tools Manufacturers Association of Ludhiana, where the validity of the government's order was challenged. The apex court is currently hearing another batch of petitions filed by employers from the private sector.

Relief For Private Sector?

It appears that the March 29 MHA order has been withdrawn and will cease to have an effect, Vaibhav Kakkar, partner at L&L Partners, told BloombergQuint. It's likely that the order has been withdrawn given the significant relaxations being provided to enable functioning of industries and commercial establishments which were prohibited earlier due to lockdown, he said.

Another reason could be sharp criticism of the directions by the industry and the ongoing litigation, Atul Gupta, partner at Trilegal, pointed out. The lockdown has been repeatedly extended with no real respite to employers, he added.

But even if the home ministry order ceases to be a challenge, private sector continues to grapple with state-specific directions. Labour laws are on the concurrent list, which is why several states had issued their own directives on maintaining salary and wage payments and, in some cases, prohibiting job cuts .

Kakkar said it's unclear to what extent the state-specific directives would continue to be applicable as they have been issued in exercise of their powers under the Epidemic Act and applicable labour laws.

Anshul Prakash, partner at Khaitan & Co., agreed. While the previous order issued by the central government ceases to have an effect, it needs to be seen the manner in which various state governments would take a stand on their orders on wages and non-termination during lockdown under the Disaster Management Act.

Further clarity will also emerge on the basis of the Supreme Court's stance in response to central government's reply over the writ petitions, experts said.