Facing Layoffs Due to COVID-19: Can We Navigate This Without Government Guidance?

Dear All,

We are a small IT company based in Karnataka. During the current COVID-19 scenario, our client has postponed all projects, and therefore, there is no revenue, and the company is unable to pay salaries to employees.

In this scenario, is there a possibility of a layoff until the situation is back to normal? Are there any directions from the government in this regard?

Please advise.

Dear RD2018, can I presume that the "lay-off" mentioned in your post is not the termination resulting in the foreclosure of the contract of employment, but the "lay-off" defined under Section 2(kkk) of the Industrial Disputes Act, 1947? If it is so, you can follow the procedure mentioned in Section 25-C in case your company comes under Chapter V-A of the IDA, 1947.

The Government of India and State Governments have advised industrial establishments to pay wages for the period of lockdown. I hope you are aware of the concessions extended by the Employees' Provident Fund Organization (EPFO). The Reserve Bank of India (RBI) has announced certain measures in the form of a moratorium on the payment of EMIs for a consecutive period of 3 months.

Dear Ms. Devashree,

Please check the following news update on EPFO benefits during the present COVID-19 scenario. You can access the article at https://economictimes.indiatimes.com...3.cms?from=mdr.

Thank you.

Dear Members,

Please refer to the attached notification from the Ministry of Labour regarding the directive not to terminate or reduce wages during the lockdown.

I hope this information will be useful.

Regards,
Ram

Government directives during the pandemic

In view of the prevailing conditions of this pandemic, all business houses like industries, factories, shops, and other commercial establishments are currently locked down due to well-known reasons. To maintain equality in society, the Government of India (GOI) has made a significant decision enabling employers and factory owners not to terminate the services of employees working in their establishments or factories as of the day the lockdown was declared. Accordingly, the GOI, along with respective state governments, has issued directives and advice to all establishments not to deduct the salaries of employees for the month of March 2020. However, this mandate does not apply to employees who resigned before the lockdown was declared.

Provisions under the Disaster Management Act

In addition to the provisions stipulated under the Payment of Wages Act (PWA) and Minimum Wages Act (MWA), the GOI has enforced the provisions of the Disaster Management Act (DMA). This act enables government agencies to direct all concerned parties to act in accordance with its provisions. Accordingly, you are required to pay salaries to employees for the lockdown period. If you do not have sufficient funds to meet this requirement, salaries can be paid partially. Furthermore, the GOI has clarified that employees can claim their Employees' Provident Fund (EPF) accumulations equivalent to three months' salary, as discussed earlier.

Thank you.

Regards,
R B Rao

If an employer himself does not earn and is forced to ask the employee to leave, would it be a crime under the law? Does the circular impose any penalty on the employer for this?

Regards,
Puran

Thank you, Mr. Rao, for the detailed explanation. I have one query: if a company is already not earning much profit and, due to the shutdown of a manufacturing plant, it will not be able to bear the expenses, would it be acceptable to pay only a partial amount of salary?

Looking forward to your response.

Organizations can pay partial salaries if they are facing a severe financial crisis due to the lockdown. This may be observed in mid-sized and small-sized companies where revenue every month is crucial. There should be a mutual understanding between the employer and employee, and all dues should be cleared as soon as the situation is resolved. Everything should be transparent.

Regards

Can companies deny payment during the lockdown period?

Yes, the government has issued a notification that no deductions should be made from wages. Such an instruction has its limitations, as no one can be compelled to do the impossible. The only option is to pay a uniform wage (not less than the living wage) to all employees, including those at the management level, during this period.

Partial Payment During Lockdown

Keeping in mind the points explained to you, if you do not have sufficient funds to pay the employees for the lockdown period, partial payment can be made to the employees who were on the muster roll of the company on the day of the lockdown. The rest of the amount, after deducting the amount paid partially, should be paid at the earliest, most probably as the first priority upon receipt of the funds. However, the State Governments are stating they will initiate legal actions against all such offenders under the provisions of the DM Act, 2005, whereas there is no such provision stipulated in the DM Act, 2005 enabling authorities to prosecute for non-payment of full wages/salary.

Thanks

Regards, R B Rao

Point for Consideration

Excerpt from the opinion below: The directions issued by the governments to employers to pay wages to all the workmen neither come within the framework of the DMA and EDA nor are backed by statutory law. What is also not clear is if any disputes get to court, what exactly could the outcome be. It would be most helpful if legal professionals in this group could clarify. Thanks in advance.

Link: https://www.thehindubusinessline.com...le31262286.ece

Central and State governments have issued notifications stating that employers shall not terminate any employee during the lockdown period. Employees can only be terminated after following the due procedure of the law.

For more information, you can visit [https://lawcovid19.blogspot.com/](https://lawcovid19.blogspot.com/)

Please suggest.

Can we terminate an employee who is going to complete her maternity leave in April and is seeking an extension of 2-3 months? We are considering this decision due to the company facing financial challenges and operating at a reduced capacity of 50%. We will contact her if any suitable openings arise in the future. This is an IT company. Can we proceed with this decision?

Dear Seniors,

In this situation, when manufacturing units and projects are shut down, it is very difficult for companies to pay employees or workmen. Practically, it is challenging to pay salaries to the employees, and for their livelihood, it is tough for the laborers or workmen to survive.

In this scenario, please suggest how HR can advise the management on the amount to release as salary.

Thanks,
Ram Prajapati

There are benefits that you can avail from the government:

- 3 Months of PF will be paid by the government.
- The government has deferred the payment of ESI/PF, which creates short-term liquidity for you.

As per the MHA directions, you cannot lay off or terminate employees during the lockdown period.

[Link to source](https://lawcovid19.blogspot.com/)

Dear Concern, I would like to submit that you will have to seek permission under Section 25 M from the competent authority for the lay-off. Since the national lockdown has been declared from 23/03/2020, the Disaster Management Act and Epidemic Disease Act are in force, superseding all applicable labor laws.

You are only considering the Industrial Dispute Act and ignoring the Disaster Management and Epidemic Disease Act. According to government orders, all private sectors are restricted from terminating employment and reducing wages.

Considering all the points above, your management will contravene the Disaster Management Act, Epidemic Disease Act, and the Industrial Dispute Act, leading to legal action against the company.

Senior member, please correct me if the narration is wrong.

Dear Umakanthan Sir, we are all aware of the concession of PF, but there are certain criteria that a company should meet to avail of this condition. So please do not assume that all companies are able to benefit from it.

For example, my company is not meeting the criteria required for availing of the EPFO concession, so we as a company need to bear the cost.

Here, everyone is thinking from an employee's perspective. Being a devil's advocate, has anyone imagined the plight of small companies, entrepreneurs, and shop owners? No concession has been provided to them by the government. They still have to bear fixed costs such as rentals if the business space is rented, electricity bills, telephone bills, and other expenses that one has to bear even if the company is not generating revenue. We should not forget that they do not have much reserve funds.

It's high time all of us think about their plight as well.

Thanking you,
Neha Bhardwaj

Employer Obligations During Financial Crises

Good morning.

This is the burning issue of today: the employer is stating that they are unable to pay salaries due to financial crises resulting from the cancellation of new and upcoming projects due to the lockdown. However, as per the Government Advisory, the employer is obligated to pay salaries, as the government is now providing benefits to employers in this regard, such as EPF contributions, etc.

Post-lockdown, any audits on this matter will be conducted by government bodies, and any company found not following the Government Advisory will face difficulties.

Regards

For employee termination during lockdown/COVID-19 related issues, please refer to the following link: https://www.citehr.com/620431-employ...ny-during.html

Exemptions for IT Companies Under Labor Acts

Okay. As per previous instructions, all IT companies have certain exemptions under all labor acts. Certain guidelines have already been given to all states by the central government to encourage and facilitate IT companies in India. In Andhra Pradesh and Telangana states, exemptions have been granted to IT companies regarding duty timings, gratuity payments, shop licenses, and removing norms. Therefore, please proceed with your state labor department proceedings.

Certainly, you should agree on an amount that is comfortable for both parties.

Exemptions for IT Companies Under Labour Acts

As per previous instructions, all IT companies have certain exemptions under all Labour Acts. Certain guidelines have already been given to all states by the central government to encourage and facilitate IT companies in India. In Andhra Pradesh and Telangana states, exemptions have been granted to IT companies regarding duty timings, gratuity payments, shop licenses, and regulatory norms. Please proceed with your state labor department proceedings.

Certainly, you should agree on an amount that is comfortable for both parties, which is beneficial for humanitarian grounds and natural justice.