Wages of arbitrariness: Covid-19 diktat to commercial establishments over compulsory wage payment revoked

By: |
May 21, 2020 5:30 AM

It is not clear if the government withdrew the order because it realised it made things worse and, in any case, with the lockdown easing, workers would start earning their wages again.

While firms may still have been able to survive with some pay cuts and laying off a section of the employees, forcing them to pay everyone full wages would drive them to bankruptcy, and risk the future of all employees.While firms may still have been able to survive with some pay cuts and laying off a section of the employees, forcing them to pay everyone full wages would drive them to bankruptcy, and risk the future of all employees.

The government has done well to scrap its order requiring all industries and commercial establishments to continue paying full wages to their employees for the duration of the lockdown even though operations remain frozen. The March 29 order had invoked the Disaster Management Act, which meant that failure to comply could invite punitive action from the authorities. In a scenario where the economy was slowing long before the pandemic, and all firms—including MSMEs—were facing an uncertain fate as revenues crashed, forcing industry to pay regular wages was distinctly anti-business. Indeed, with the economy set to contract in the current fiscal, the government needed to be trying everything possible to keep firms afloat rather than saddling them with diktats on wages. The diktat, as it happened, would make things worse for labourers as well. While firms may still have been able to survive with some pay cuts and laying off a section of the employees, forcing them to pay everyone full wages would drive them to bankruptcy, and risk the future of all employees. In such a situation, even when the lockdown eased and the economy hobbled back toward normalcy, there would be no improvement as the firm would have already shut shop.

It is not clear if the government withdrew the order because it realised it made things worse and, in any case, with the lockdown easing, workers would start earning their wages again. Another possibility is that the government realised that the cases on this matter in the Supreme Court were going against it, so it decided to beat a hasty retreat. In two cases, the SC forbade coercive action by the government against firms that were laying off workers or cutting their salaries; no final order has been passed as the cases are still being heard. One petition, filed with the Bombay High Court, even argued that the order violated the Section 25C and 25M of the Industrial Disputes Act, 1947, which deal with payment of 50% wages when a worker is laid off, and the exception to lay off workers during a natural calamity. Indeed, last month, the Parliamentary Committee on Labour, in its report on the Industrial Relations Code, 2019, reasoned against the payment of even limited wages, saying “in case of natural calamities, payment of wages to the workers until the re-establishment of the industry may be unjustifiable”. At a time when the government is trying to improve the country’s business-friendly image, the fact that such an order ever got passed suggests that the old command-and-control mindset—and innocence of economics—hasn’t quite disappeared.

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