Your Company Is Reducing Salary During Lockdown? No Action Will Be Taken, Says Supreme Court

Last month, the Supreme Court had refused to delay the government circular asking private establishments, including MSMEs, to pay full salaries to their employees during the COVID-19 induced lockdown. 

On May 15, the Supreme Court stayed the operation of a government circular asking private companies including MSMEs to pay full salaries to their employees during the COVID-19 lockdown. 

Read to find out more…

The Back-Story!

The Ministry of Home Affairs (MHA) had on March 29 issued a circular directing all private companies to continue payment of full wages for the duration of the lockdown. The order had also warned of legal consequences if the directions for payment of full salaries were not complied with.

However, the apex court directed the MHA to put on record its policy decision and also asked it to explain as to why its order directing private establishments to pay off full salaries without any deductions should not be stayed.

MHA had issued this order following the incidents of enterprises resorting to pay cuts and layoffs in view of reduced business and revenues due to the lockdown. 

A bench led by Justice NV Ramana was hearing various petitions filed by companies including Ludhiana Hand Tools Association and Ficus Pax seeking revokement of the MHA’s circular.

Why Has the Supreme Court Put a Hold on MHA’s Circular?

Alongwith the delay, the SC has also asked the Centre and states not to charge the private firms, factories and others over non-payment till next week. The Centre had sought a week’s time to file its reply in the matter.

The petitioners sought the revoking of the MHA’s circular and blamed the government of passing such orders without due care and deliberation on the financial implications for the employers. They warned that making such payments will lead to the closure of many of the establishments. They claimed this move is bound to cause permanent unemployment and will adversely affect the economy.

Ludhiana-based association of hand tools manufacturers, comprising 41 MSMEs, said, “Government has not taken any steps for workforce instead put the burden on employers to pay full wages.” 

The petition added that an employer and employee have reciprocal promises whereby the right of an employee to demand salary is reciprocal to performance of work by such employee. Besides, the petition said, that an employer has a right not to pay if no work is done.

The MSMEs had said that such a blanket direction for payment of full salaries is manifestly arbitrary, unconstitutional and unsustainable. In addition they had also stated that private employers should be completely spared from paying their employees during the lockdown as the one-sided implementation of contract alone was not permitted.

The petition also stated that hundreds of crores of unclaimed provident fund and Employees State Insurance Corporation contribution lie in banks that could be used by the government rather than putting burden on the private sector.

This development comes as a good news for the employers but a bad one for the employees!