On March 29th 2020, the Home Secretary – acting in his capacity as the Chairperson of the National Executive Committee under the Disaster Management Act – issued an order requiring, inter alia, that "all the employers, be it in the Industry or in the shops and commercial establishments, shall make payment of wages of their workers, at their work places, on the due date, without any deduction, for the period their establishments are under closure during the lockdown." The context of the Order is important: this direction was one of five directions passed in light of the fact that, after the announcement of the nationwide lockdown on March 24th, there had been large-scale movement of migrant labourers back to their home-towns. Mandatory payment of wages was one measure to forestall this movement, along with other measures such as suspension of rent for a month, a temporary ban on evictions, and so on.
This order was challenged before the Supreme Court in Ludhiana Hand Tools Association v Union of India. After granting a temporary stay on coercive action against businesses that were not complying with the order, the Court heard arguments, and judgment is expected later this week.
The primary argument of the employers turns upon the contention that the Disaster Management Act does not grant the central government the power to compel the payment of wages to the workers. The order itself invoked section 10(2)(l) of the DMA, and the employers argue that this provision only enables guidelines to government authorities, not private entities. Petitioners also contend that Section 65 of the Disaster Management Act, which allows the National Executive Committee to "requisition resources" in order to ensure a prompt response, and is followed by Section 66, which compels the payment of compensation in case of requisition, is the only provision under the DMA which authorises the government to impose obligations on private parties is Section 65. This (or so the argument goes), on its terms, does not allow a direction for the mandatory payment of wages; and that in any event, even if it does, the terms of Section 66 have not been complied with.
Now, as a legal argument, this contention is very clearly flawed. There are two reasons for this. The first is that the series of guidelines and orders issued on and after the 24th of March 2020 have not been issued under Section 65 of the DMA, but under Sections 10 – in particular, 10(1) and 35 of that Act. Previously on this blog, we have critiqued these sections for being over-broad and enabling executive carte blanche; however, as long as these sections remain on the statute books, the power of the government to act remains within the framework of the DMA (Section 35, in particular, authorises the government to take measures that are "expedient" for the purposes of the Act).
More importantly, however, the point is this: the impugned direction in the order of 29th March cannot be severed from all the other directions that have been passed by the NEC under the framework of the DMA. These directions – that constitute the warp and the weft of the lockdown itself – impose obligations upon private parties. These include, for example:
Examples can be multiplied, but the basic point is that if the Court was to hold that the payment of wages direction is unconstitutional because the DMA denies to the government the power to impose obligations upon private, then it would necessarily follow that the lockdown itself – which is nothing more than a web of interlocking obligations imposed upon private parties – is itself unconstitutional, as a whole.
Or, to put it another way: in order to enforce the lockdown, the government imposed a series of obligations and restrictions upon a whole host of private parties and individuals, that have put them to a significant amount of hardship. It would be oddly asymmetrical if those restrictions were upheld, but directions to mitigate their impact upon some of the most vulnerable and marginalised segments of society, were struck down for want of power.
Now it may be argued that the distinction between the orders set out above, and the direction for the payment of wages, is that in the latter case, there is an already existing regime of labour law (set out in the Industrial Disputes Act and other laws) that governs this question. This argument, however, is flawed as well: the DMA has a general non-obstante clause (Section 72) that makes it prevail over inconsistent statutory provisions in other laws; however, the Industrial Disputes Act has a specific exception to its non-obstante clause for provisions that are more beneficial to workmen than what they may get under the ID Act; the impugned direction, it should be clear, falls squarely within the scope of the objection, thus obviating any need for adjudicating between seemingly conflicting laws.
Consequently, the challenge to the competence of the NEC in issuing the directions for the payment of wages cannot succeed. What of the substance of the direction itself? It may be argued that it violates Article 19(1)(g) (freedom of trade and commerce) by compelling employers to pay wages even when their shops themselves have been closed down. In this context, it is important to note the following: the source of the dispute is State action; in particular, the Order of 24th March 2020, mandating the closure of all shops and establishments for the duration of the lockdown. Now, imagine a situation in which the impugned Direction had not been passed. The result of this would be that workers would – effectively – be deprived of their right to livelihood (under Article 21), as a direct consequence of State action.
It is therefore clear that Article 19(1)(g) is not the only right at issue in the present case, but that Article 21 is involved as well. It is further crucial to note that Article 14 is also implicated: the ability and means to work from home is directly related to socio-economic class, and therefore the Guidelines of closure of 24th March disproportionately impacted workers who are already the most vulnerable and marginalised in society.
Now, in its recent judgment on the Right to Information Act, the Supreme Court noted that in case there was a clash of two fundamental rights, the doctrine of proportionality would apply. Proportionality – in such cases – requires a balancing exercise that ensures that neither of the two rights is effaced. It is clear that no Direction at all would deprive the workers entirely of their right to livelihood during the period of the lockdown, and thus effectively efface Article 21 during that time. On the other hand, it is not evident that a temporary order for the payment of wages would efface the right under Article 19(1)(g) (i.e., force permanent closure of business). To the extent that it does impose a burden upon employers – that also flows from State action – there is no doubt that the State ought to pay compensation. For that, however, there should lie a direct claim against the State for its failure to protect rights under Article 19(1)(g) after its own action has led to their deprivation. However, the remedy for that cannot be to throw the other party to the equation – the more vulnerable and marginalised party – to the wolves, by striking down the payment of wages order itself.
It is therefore my submission that under the existing legal framework, the Direction for payment of wages is legal; at the same time, however, there should be an enforceable fundamental rights claim made against the State for its failure to adequately compensate employers as a result of the lockdown that it imposed following the Order and Guidelines of 24th March 2020.
This Article Was First Published Here