India, like many other countries of the world, is fighting the novel coronavirus by maintaining social distancing and restricting the business activities to bare minimum. The country has been under lockdown since 25th March 2020. This means all businesses, industries, schools, entertainment places and so on are closed except the essentials like groceries and chemistshops. Some industries, including pharmaceuticals, are categorized as “essentials” in this lockdown period and can operate by adhering to minimum social distance guidelines prescribed by GoI. Pharma sector, which is allowed tooperate to permissible capacity during the lockdown, is unable to do so owing to many reasons. Disrupted transport services for the employees, fear of catching the infection despite social distancing measures, and lack of interest of employees to work as employers are mandated to pay the salaries regardless of revenue and work done , are some of the key reasons.
In these circumstances, the pharma manufacturing units are trying to fulfil their moral obligation by continuing manufacturing to ensure adequate supply of medicines in the country in this testing time. However, they are quite challenged with increased cost of operations incurred by adhering to guidelines stated by GOI for Covid 19 amongst other,paying wages/salaries to employees. The revenues are substantially impacted due to suspension of operation and indeed for fixed expenses and Nil revenue reflecting adverse balancesheet.
The government of India has advised the employers to pay the wages and salaries to employees and not lay off employees during the lockdown period on humanitarian grounds. Such advisories are in the nature of advise of course is desirable in the present scenario but incapacity of Pharma Companies mainly in MSME sector cannot be ignored. However, the order issued by the Ministry of Home Affairs (MHA) dated 29th March 2020, directs that “employers shall make payment of wages to their workers, at their workplaces, without any deduction for the period their establishment is under closure during lockdown”. Such direction by the MHA has the legal enforceability wherein failure to comply with such direction will lead to penal provision under section 51 read with section 56 of the Disaster Management Act.
The question arise for consideration is that if this mandate is applicable to Salary as well? Legally speaking there is difference between Salary and Wages. The direction issued by the MHA specifically and exclusivelytalks about ‘wages to workers’. Thus, one needs to understand and interpret the word ‘wages’ and ‘workers’.
As per Industrial Dispute Act,1947, Section 2(rr) defines wages as “all remuneration capable of being expressed in terms of money, which would, if the terms of employment, expressed or implied, were fulfilled, be payable to a workman in respect of his employment or of work done in such employment”.
Section 2(s) of the said IDAct, defines the workmen as “workman” means “any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward but excludes employees in managerial, administrative and supervisory position”.
As far as employees in managerial, administrative and supervisory roles are concerned, their conditions of services are guided by contractual arrangement between the parties. This gives a liberty to the employer here, to exercise his discretion in payment of salaries during the lockdown situation based on Section 56 of the Indian Contract Act which relates to frustration of contract due to impossibility of performance. Another legislation, Section 2(kkk) of the Industrial Dispute Act 1947, permits an employer to lay off his employees if he is unable to give employment to its workers due to natural calamity.
Reading these legal provisions together, it interprets that an employer from any category of industry should compulsorily pay wages to workers who are not in managerial, supervisory and administrative designations during the lockout situation even in absence of any business activities by these employees.
However, the question to be asked is whether the order of MHA also relates to establishments that are not under closure during lockdown?.Thus the employees of units like ‘pharma manufacturing’ who have valid permission to operate during the lockdown and whose operation is open during the lockdown wherein necessary arrangement was made by such company for social distancing as per the MHA guidelines but witnessing absenteeism of workmen and not reporting to the duty are to be excluded for the benefit of compulsory wages. It appears intentional avoidance or absenteeism will not protect the workman.
In the lockdown situation with continuance of operations of the pharma sector, it’s a challenge for both employers and employees. Therefore, while employees should try their best to make it to work and support the cause, the employers may exercise their discretion mindfully on payment of wages/salaries to employees to avoid big losses during operations. Perhaps, using incentivizing strategies, such as extending extra remuneration to motivated employees and pay cuts for the non-performers or the ones unavailable due to illegitimate reasons, could be away forward. .
In this crisis situation, manufacturing and availability of medicines and other pharma products is of paramount importance and therefore, it is critical for this sector to continue operations and should be supported by the government and people alike. Employees of this sector must understand the pressing needs for their services and should put in their best effort to report to work. Being optimistic and assuming that the lockdown will not last longer, any good employer will always strive to retain their best performing and supportive employees. As it is rightly said that one gains wisdom faster in difficult times than in prosperous times, an open dialogue between the employer and employee wherein both can express their concerns and reach a midway is always suggestive
Disclaimer: The views presented above are personal in nature based upon personal understanding of the law. Article is informative in nature and has no other purpose.
Garima Gupta,Advocate, Delhi High Court,Founder ‘Garima Gupta Associates’, New Delhi
The Authormay be contacted at firstname.lastname@example.org