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A supreme Error- Compensation to the workers

OOn 15th May 2020, in a Writ Petition (WP) filed by the Hand Tools Manufacturers Association (which claims to consist of 52 firms, partnerships and private limited companies engaged in the manufacture and distribution of hand tools) challenging the MHA notification directing employers to pay full wages to their workers during the lockdown, the Supreme Court has passed an interim order directing that “No coercive action shall be taken in the meanwhile” against its members. (A similar order has been passed in another petition filed by Indian Jute Mills Association.) These orders seem to have been passed erroneously and ought to be immediately reconsidered for the reasons stated herein.

While invoking the writ jurisdiction of a court, a petitioner is required to come with clean hands and be in compliance of the law at least as per its own contention. It also requires the court to consider the equities between the parties while remaining within the bounds of the law. The court also does not go beyond the prayer made in the petition to grant any further relief. In the event that the court finds that the petitioner is not in compliance of the law even as per its own contention, it would normally forthwith dismiss the petition. At best it would grant it time to comply and only then to consider the petition on merit. Hence, it follows that these petitioners must at least assert (and then to also satisfy the court) that they are indeed in compliance of the law as they perceive it.

It is noted from their petition (of the Hand Tools Manufacturers Association) that the petitioners have challenged only that part of the said notification which requires them to pay full wages to their workers during the lockdown. It is not their contention that they should be permitted to retrench workers or to close down in accordance with law. Hence, that contention cannot be advanced and need not be considered.

The petition contends inter alia that the Industrial Disputes Act, 1948 prescribes

…payment of 50% wages under similar circumstances” and that “…the Industrial Disputes Act, 1947 is a complete code in so far as the right to lay-off and payment of wages is concerned”.

Yet, it is noted that they have not contended that any of them had declared lay-off or that they were actually paying lay-off compensation (“50% wages under similar circumstances”) according to their understanding of the Industrial Disputes Act. Since there is no such assertion, it must be presumed that they have not declared lay-off and that they are not paying any compensation to their workers.

It is also noted that the petitioners have impleaded only the Union of India (UOI), the Home Ministry, and the Govt. of Punjab. Let alone the affected employees, there is not even a pretence of impleading any workers union/ association/ federation to represent their interests before the Court. While it is noted that the Solicitor General (SG) was present before the Court when the said order was passed, it may also be recalled that the SG had opposed another petition by an NGO (filed through Harsh Mander) which had sought the enforcement of its very same notification. Hence, the UOI has clearly been running with the hares and hunting with the hounds and does not seem to be keen to enforce the said order. Therefore, the presence of the SG should not have sufficed and the Court should have required the petitioner to at least implead some of the reputed unions or federations of workers before it passed any such interim orders. Indeed, interventions have now been filed by the Trade Union Joint Action Committee, the Trade Union Centre of India and the Hind Mazdoor Sabha.

The MHA order has been passed under the Disaster Management Act (the notification is ambiguous on whether it applies only to migrant workers as stated in the recitals or to all workers as stated in the operative part) and, for the purposes of this article, it is presumed that it is illegal (and in the view of this author it is indeed illegal for reasons that require a full separate discussion). What is examined herein is the consequence of a declaration that it is indeed illegal, for such a declaration is the best that these petitioners can hope for and, indeed, is all that they have sought. Hence, what is examined is the best-case scenario for the petitioner in this petition.

Now this Association consists of firms, partnerships and private limited companies which appear to be small employers. Hence, it would seem that many of them would be employing less than 50 workers. There might also be some that employ 50 or more, some perhaps even 100 or more workers.

Section 25C of the Industrial Disputes Act (ID Act) requires establishments employing 50 or more workmen to pay about 50% of Basic wages + DA to workmen who have been laid off. (Section 25M also requires similar compensation to be paid by certain establishments employing 100 or more workmen and hence, their case shall also be considered with those to which Section 25C applies.) Being an enabling provision, it allows such employers to reduce the emoluments of their workers, but only if they have invoked the provision. That requires them to declare a lay-off in the manner prescribed by the Act. Since Rule 75A of the ID Rules permit an employer to declare a lay-off within 7 days of its commencement, at the very most these employers can now declare lay-off only wef about the middle of May. However, it might yet be possible for them to file affidavits before the Court stating that they had not declared lay-off thus far for fear of being prosecuted for violation of the MHA order and hence, should be deemed to have declared lay-off. Yet, even that would only reduce their liability to what is prescribed under Section 25C. Thus, at the very least, they would be required to pay about 50% of Basic wages + DA to their workers.

Now, in The Workmen of M/s. Firestone Tyre and Rubber Co. of India (P) Ltd. Versus The Firestone Tyre and Rubber Co AIR 1976 SC 1775 (Firestone judgment) the Supreme Court held that, in the absence of a similar provision in respect of establishments employing less than 50 workmen, the employer could not reduce their emoluments even if it declared a lay-off. Consequently, those employing less than 50 workmen are required to pay full wages. However, in Firestone the Court did give even such employers a way out by holding that it was permissible for them to get their liability reduced by raising an industrial dispute whereupon it would be “…open to the Tribunal or the Court to award a lesser sum finding the justifiability of the lay-off”. In Firestone the Supreme Court reduced the liability of an such employer to 75% where it found the lay-off to be justified. Perhaps (in such industrial dispute) the present employers could contend that their liability should be reduced to 50%, perhaps even less. They could perhaps even pray that pending decision of the dispute they should not be required to pay any sum whatsoever (though that is doubtful). What the court later decides is another matter and if the court refuses to grant an interim order they could possibly challenge such refusal (though it is doubtful that such a challenge could succeed). However, at the very least such a petition must be on record before they approach the Supreme Court. Yet, none of them appears to have done so and the Court also seems not to have noticed this omission.

As far as employers who are employing 50 or more workers are concerned, since express provisions exist (Section 25C / 25M) prescribing their liability, it is extremely doubtful that a dispute could even be raised praying that it be further reduced. Nevertheless, such employers could possibly raise disputes praying that their liability be further reduced and then come before the Court. Yet, none of them appears to have done that either and the Court also seems not to have noticed this omission either.

Here it may also be noted that since Section 25C applies only to workmen, it follows that, for employees who do not fall under that definition, the employer would likewise (for the reasons mentioned in Firestone) have no power to reduce wages (unless the contract allows the employer to reduce wages and which is most unlikely). It must, therefore, pay full wages. Yet, the petition makes no mention of what these employers are paying such employees either. Since it does not seek any relief in respect of them (and it cannot because such employees are not covered by the said MHA order), they must pay them full wages (unless they negotiate some other terms with them). It is noted that the Court has also omitted to ask the petitioners what payment they are making to these persons.

In any case, as noted earlier, the law requires payment of at least 50% of Basic wages + DA and the best that these employers can contend is that they had not declared lay-off for fear of prosecution. They cannot ask that they have no liability whatsoever! Since the most they have contended is that the MHA order be struck down (and not also Section 25C which has been on the statute book in its present form since 1965 and has not even been challenged), at the very best the MHA order would be struck down by the Court. That means that Section 25C would still remain. Why should the workers be left without even this compensation, that too in these times? Surely it would be entirely iniquitous to do that!

It cannot be argued that the Supreme Court is only considering the validity of this MHA order and whether there is power under the Disaster Management Act to issue it and that, hence, that question can be decided even in the abstract. For, what is the interpretation of the Supreme Court’s order at this stage? It does not say that “No coercive action shall be taken in the meanwhile under the Disaster Management Act” but merely that “No coercive action shall be taken in the meanwhile”. Surely it would be interpreted as also prohibiting any coercive action under the ID Act or other labour statutes for their failure / refusal even to pay 50% of Basic wages + DA. The Court has, thus, passed an order beyond what it had been called upon to do and this would cause a lot of suffering to persons who have not been given any opportunity of being heard.

Even though these orders have now been passed, it is hoped that the Court would immediately take corrective action.

As far as other parties that are presently not before the Court are concerned, they must, at the very least, forthwith declare lay-off and file a petition challenging the said order while contending that they had thus far not declared lay-off for fear of being prosecuted for breach of the MHA order and have challenged the said order now in view of the interim protection granted by the Court in the Hand Tools Manufacturers Association matter. If they have not already paid compensation to their workers and other employees as prescribed under Section 25C, they must also immediately do so (or negotiate settlements with them to further reduce their liability for wages) and state the fact that they have made such payments. They might also consider raising industrial disputes to further reduce their liability, though it is doubtful if they could be successful in that endeavour. Of course, if they can settle the matter by entering into settlements with their workers, that would be ideal for, in that event, they need not even approach any Court. The government will not prosecute any employer that is paying not in terms of the said MHA order but in terms of a settlement with its workers. Should such a prosecution be nevertheless commenced, it would almost surely be quashed by the Courts (and even in Firestone the Supreme Court allowed settlements to stand where they had been entered into).