Job Losses and Wage Cuts due to Coronavirus crisis: Is it Legal?

Despite Prime Minister Narendra Modi’s appeal, job losses and wage cuts, which are two problems that working professionals have a tough time dealing with, are now the reality across various sectors in India. As the Government of India extends the lockdown to flatten the curve and put an end to the Coronavirus crisis, the Indian economy must brace for impact.

Although certain relaxations have been allowed to boost the economy, and certain bailout packages from the government are expected, the larger population will continue to be affected for some time now. With GDP cuts being forecasted and figures on business loss still trickling in, several employees are already complaining about wage cuts and even losing their jobs.

While the Ministry of Labour and Employment and the Prime Minister himself has urged both the government and private establishments to not terminate jobs and indulge in wage cuts due to the Coronavirus crisis, some organizations, due to economic downswings and the lack of revenue in current times, seem to be doing so.

“Our organization told us to resign from our permanent payroll position and serve the 2 months notice period during this current Covid-19 corona situation. During the Lockdown period our organization deducted our Earned Leaves. It is difficult for us to survive as there are no job opportunities in this situation. We have our liabilities as most of us are single earning members of the house, running Loans, children education fees etc., (sic)” says Bhawna Bhutla on DataQuest.

“My employer just sent me 33% of salary and I am working in the company since 10 months and today morning I got a call from boss saying once this lockdown is over they have taken a decision to downsize office staff and two of us have been removed.. what should I do.. now.. Its been told to handover all the official data to them and give resignation, (sic),” says Vikas.

“Dear sir, I am also facing a similar issue. I am working with a reputed school in Jamnagar and suddenly my superior is feeling that I am not performing. In this situation where the entire country is fighting with the epidemic, my employer wants to terminate me. Now in this situation where do I go. Already they have announced that they would be paying the employees only 50% of the wages for the month of March 2020 as they are facing a shortage of funds. Please guide for further action, (sic)” says Swapna Anand on DataQuest like over sixty other employees in a similar situation.

Are Layoffs due to Coronavirus Crisis Legal? Here’s What Industry Legal Experts Say

As employees from various organizations contemplate legal options available to them, Industry legal experts in the know of the matter said that legal implications of each of the actions, layoffs, wage cuts, or retrenchment, will vary from establishment to establishment perspective and as per applicable state-specific laws and regulations.

Layoff is defined under The Industrial Disputes Act, 1947 as failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity or for any other connected reason to give employment to a workman. In the current scenario, the Coronavirus crisis can certainly be classified as an unprecedented natural calamity.

During layoff, the workman continues to be in the employment but at reduced pay. If the layoff continues for a duration of 45 days or more, the employer can proceed for retrenchment. Compensation paid for layoff is adjustable with the compensation payable for retrenchment. The processes for layoff shall differ from establishment to establishment depending on the number of workmen employed and nature of the activity undertaken, said the experts.

As far as pay cuts are concerned, there is no specific legislation till date which deals with the reduction of pay. As being reported, several industries are undertaking reduction of pay and standardized pay cuts are being implemented across the board in the light of the recent situation arising because of the Coronavirus crisis. In this regard, however, if the implementation of a pay-cut is proposed, ideally the same should be applied uniformly across the board, without any kind of discrimination, added the experts.

Furthermore, on the termination of services of an employee, the option is available to the employers but for the same, all the necessary processes including, but not limited to, notice period, intimation to governmental authorities, payment of retrenchment compensation, leave encashment, etc. will need to be complied with. As a consequence, Industry legal experts say that it is advisable that this should be considered as a last resort.