The Supreme Court’s interim order on payment of wages during the lockdown – A stark ignorance for ground realities

Over the course of the previous two months, we have witnessed devastating instances of migrant workers walking thousands of kilometers to reach their hometowns, after they lost their jobs and were denied wages by their employers. One among the many reasons for the plight of the migrant workers and daily wage earners is the non-implementation of an executive order issued by the Ministry of Home Affairs on 29^th March (‘the 29^th March Order’). The 29^th March Order, issued under the provisions of the Disaster Management Act, 2005, mandated that  all employers in (i) industrial undertakings; (ii) commercial establishments; and (iii) shops shall ensure that wages are paid to their workers without any deduction, for the period during which their enterprises were under closure during the lockdown. 

This Order had legal force for around 50 days, and was revoked through the guidelines for Lockdown 4.0, which were notified on 17^th May 2020. Meanwhile, the 29^th March Order was also challenged in the Apex Court by multiple private enterprises and enterprise associations. They contended that the Order was in violation of the employer’s right to carry on trade and business under Article 19(1)(g) of the Constitution. They also argued that the Order was arbitrary and unreasonable, as no wages can be paid in a situation of closure, where no work has been undertaken by the employees.

The Apex Court had granted an effective stay on the operation of the 29^th March Order through two interim directions passed on 15^th May and 4^th June - where it held that no coercive action shall be taken against any employer who fails to pay full wages. It is pertinent to note here that even after the Order mandating payment of wages was revoked on 17^th May, the Court has continued hearing the matter. This is because the Court has sought to examine whether the Order was legally valid i.e. whether it can be validly passed by invoking the provisions of the Disaster Management Act, 2005. If the Order is legally valid, an obligation is placed upon the employer to ensure payment of wages for the 50 days for which the Order was in force i.e. from 29^th March to 17^th May.

Keeping this background in mind, let us analyze the latest interim direction that was issued by the Court on 12^th June. In its 12^th June interim order, the Court deferred the adjudication on the legality of the 29^th March order, and stated that those private enterprises who are willing to negotiate with their employees on the extent of wages to be paid for the 50-day period may undertake negotiations and try to reach a settlement. If such a settlement is reached, then that would prevail over the mandate of the March 29^th Order – which had directed full payment of wages without any deduction. The Court adjourned the matter to the last week of July, and stated that its earlier direction on not taking any coercive action against employers for failing to pay wages shall continue to be applicable.

As the Court adjourned the matter and continued the effective stay it placed on the enforcement of the 29^th March Order, there is still no certainty as to whether wages will have to be paid for the 50-day period during which the Order had legal force. While stating that willing enterprises may enter into negotiations with their employees, the Court showed a blatant disregard for ground realities. How is it possible for migrant workers, who may have returned to their hometowns, to ‘negotiate’ with their employers, who are placed in another State? A majority of migrant workers and daily-wage laborers also work in the informal sector, and hence cannot be represented by an employee association or a trade union.

Encouraging a settlement by negotiating the extent of wages to be paid is practical and possible only in a limited capacity in the formal sector. Even in the formal sector, there may be an asymmetry in the bargaining power between the employer and the workers. The employer may take advantage of this asymmetry and state, for instance, that the workers should accept only 50% of their regular wages, or face the risk of termination of their employment. Such a negotiation is unlikely to be on fair terms, and any settlement arrived at may be on terms that are detrimental to the employees and workers. 

The Court here also failed to take into account that most migrant workers and laborers earn their wages on a daily basis. If they do not get their wages for even a single day, they may not be able to afford two square meals. The Court’s repeated deferral in determining whether wages should be paid only exacerbates their plight further. If the migrant workers had received their wages on time, and were not left stranded and penniless by their employers, their condition would have been less miserable than what it turned out to be.

By making wage payment a matter of negotiation between the employer and employees, the Court also exempts the Central and the State Government from any responsibility. The Court notes that the lockdown imposed by the Central and State Governments led to a situation where employers could not offer work, and the employees could not take work – for no fault of theirs. But, the Court failed to give effect to this observation. It refused to acknowledge that when the closure has been directly mandated by the State, the State has an obligation to secure the workers’ right to livelihood under Article 21, by providing appropriate means of income support.

The Court also noted that all private enterprises and industries cannot be painted with the same brush. But, it did not take this observation to it’s logical conclusion. While some private establishments may be in a position to pay wages even during a closure, there may be multiple other enterprises, such as those in the MSME sector, which may be on the brink of shutting down their business as a whole. To illustrate, while companies such as Reliance, Maruti Suzuki or Ambuja Cement may still be in a position to pay their workers, a small-scale garment enterprise in the MSME sector may not be in a position to pay wages. Many small-scale enterprises may hence lack the financial resources to comply with the 29^th March order, due to the extent of economic distress caused by the lockdown.

This can be rectified only if the Central and State Governments provide income support directly to the workers, or provide financial assistance to those private establishments who currently lack the financial means to pay their workers. The Court could have asked the Central Government to justify its failure to undertake any of these measures, instead of leaving the issue to be resolved mutually between the employer and the employees. It could have, at the minimum, directed the Central Government to explain as to how it plans to ensure universal implementation of its own order, for the 50-day period from 29^th March to 17th May. Unless the State steps in and provides financial assistance to severely stressed enterprises, the 29^th March Order cannot be universally implemented in letter and spirit.

Meanwhile, the workers and laborers continue to suffer due to a lack of stable income. This collective failure of the Court and the Government to ensure wage support has culminated in a situation where the plight of the workers is a curve that is unlikely to flatten.