Force Majeure in Employment Contracts- Covid-19 Situation

WAGE BILLS- FORCE MAJEURE

The legal preposition for consideration as to whether a business entity can reduce its wage bills in a situation of a force majeure. The answer to the point of consideration would depend on the hierarchy of an employee in the business entity. So far as the managerial, supervisory and category employees are concerned, the employment contracts can always be suspended by the entity provided the employment contract of the concerned employee contains such force majeure clause.

So far as the ‘workman’ category of employees is concerned, the Industrial Disputes Act takes care of such a situation. The ID Act in cases of non availability of the work, provides for an option to the employer to reduce its wage bill by laying off the workmen. The condition for lay off is however that the during the 45 days of such a lay off, half the salary and dearness allowance is required to paid to the laid off workmen. When the lay off period exceeds 45 days, there can be settlement between the employer and the workman. The employer can also retrench such laid off workman after the expiry of 45 days by following the provisions applicable to the retrenchment under the Act. There is no permission required to be taken from the appropriate government for laying off the workman due to non-availability of the work.

Following are the essentials for a lay off :-

1.          There must be failure, refusal or inability on the part of the employer to give employment to a workman.

2.         The failure, refusal or inability should be on account of shortage of coal, power or raw materials or accumulation of stocks or breakdown of machinery, or natural calamity, or any other connected reason.

3.         The workman’s name should be on the muster rills of the Industrial establishment.

4.         The workman should not have been retrenched.

Section 2 kkk defining “Lay off” is reproduced as under for reference:-

“Law-off (with its grammatical variation and cognate expressions) means the 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 whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched.

Section 2 (oo) of the Industrial Disputes Act defining ‘retrenchment’ is reproduced as under:-

“Retrenchment mean the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include-

(a)        Voluntary retirement of the workman; or

(b)       Retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or

(bb)     termination of the service of the workman as a result of the on-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or]

(c)        Termination of the service of a workman on the ground of continued ill-health;

PAID LEAVES OR WORK FROM HOME

The present day scenario considering the Covid-19 situation, the employees have been advised to work from home or in alternative some of the employers are giving paid leaves to their employees. Almost every corporate establishment has now by and large adopted this strategy through online work portals which not only enables the employees to receive salary by working from home in a virtual context and also output of the business is also generated to a large extend.