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FAQs on Employment and Termination: COVID-19

By 14/12/2020March 12th, 2021No Comments

The world is in stasis with the Novel Coronavirus (COVID-19) infecting millions of people world over. The slow-balization of economies under the pretext of COVID-19 has immobilized citizens, frozen funds thereby arresting growth across industries. News of employees being terminated or laid off are common-stance with plummeting business sales and tanking asset prices in the economy.

In response to the pandemic, employers across industry verticals have altered traditional working methods to limit contact between employees. Embracing remote working methodologies, bonus and salary cuts and mass layoffs, yet oblivious to the depth of its impact, one thing is abundantly clear – the workplace will never be the same again!

Here we have envisaged different scenarios pertaining to employment and termination considerations keeping in mind the interests of both employer, employees, and analyze it through the lens of applicable laws and advisory. 

Employer Perspective:

Can employees be terminated? 

As per the Ministry of Labour & Employment (“MLE”) Advisory, employers are advised against termination of employment during the lockdown. It further states that if any establishment is non-operational, it must deem its employees on-duty. Thus, while termination can be carried out as per employment terms and applicable law (such as the Industrial Disputes Act for workman termination), it is advisable that employers do not terminate employment during the lockdown. Specific care should be taken where the employer contemplates termination of workman or where the workforce is unionized, as a termination in the given circumstances is very likely to be questioned as an illegal termination resulting in potential industrial dispute under the Industrial Disputes Act.

Non-permanent employees must be laid off in the following order: Emergency, Temporary, Provisional, and Probationary. If additional reductions are necessary, permanent employees must be laid off on the basis of seniority.

Can an organization postpone payment for employee bonuses or payroll changes?

Yes, organizations can postpone or decline bonus/incentive payments and payment modifications. These are usually at the discretion of the administrator. On a revenue basis, for the commissions mentioned in the employment contract, the organization is responsible for fulfilling its contractual obligations.

However, if your organization has employees who are “qualified” under the bonus payment method (income is less than INR 21,000 / $ 280 / month), you cannot refuse to pay the “bonus”. In this case, the employer is legally obligated to pay 8.33% to 20% of salary to all qualified staff within eight months of the end of the accounting period.

What options do employers need to reduce labor costs?

The Department of Labour and the state government have issued several recommendations to public and private institutions to refrain from headcount and salary cuts during these difficult times. The MHA (Ministry of Home Affairs) issues notices aimed at keeping salaries and ensuring that wages are paid on time. But in a directional move, the central government recently announced that it will cut salaries/welfare benefits for cabinet and parliamentarians by up to 30%. Some of the measures an organization can take are:

  • Option 1 – Reduce leadership/advance level salaries to ensure all lower-level jobs are retained.
  • Option 2 – Utilization of paid leave – For many employees with overlapping telecommunication roles, employers can evaluate the use of the leave / annual leave balance. This allows employees to get paid and keep their jobs.
  • Option 3 – Sabbatical – For employees with duplicate work in a telecommuting situation, if there is no annual leave balance, such an employee should go to sabbatical leave until the situation improves. You may be asked. Their work is restored to full functionality. In this scenario, employees must continue to derive benefits from the insurance scheme and other benefits provided by the organization. If these employees sign up for the organization’s PF scheme, the company must continue to make minimal PF contributions during the sabbatical period.
  • Option 4 – Work Readjustment – ​​Some roles have work that needs to be completed, but not at 100% utilization. In all such cases, the organization can evaluate the options to reduce working hours and thereby readjust accordingly.
  • Option 5 – Temporary Payroll Reduction – Some organizations evaluate the option of exercising payroll cuts above the level and position this as a temporary move to business recovery (former salary. If the level is restored).
  • Option 6 – Dismissal / Layoff – In the extreme case where companies are fighting for survival, organizations are forced to dismiss staff. In such cases, it is advisable to make every effort to alleviate staff distress by complying with the terms and conditions and creating a cancellation package with minimal impact on staff.

Can employers calculate Indian unused hours by deducting Indian salaries/wages?

Working hours need to be modified to reflect the level of support required, and salaries adjusted (reduced) accordingly. This also applies to white-collar staff. As the national lockdown continues to be valid, that is, with order number 40-3 / 2020-DM-I, the Indian Government directs all employers to pay wages to workers (especially in the “workers” category). No dates and deductions. Therefore, the employer can carry out wage cuts by exercising force majeure under certain circumstances in such cases. The use of force majeure is a legitimate process. It is recommended that you go through legal proceedings and documentation before officially doing so. It affects the overall business reputation, customers, and suppliers.

Is the employer obliged to pay during a lockdown?

Teleworking employees must be paid by applicable law and employment contracts. The question is only relevant if the organization does not allow it or if the employee does not WFH. The CG notice makes no mention of the employer’s obligation to pay. Blockade orders in some states, such as Delhi, Tamil Nadu, Uttar Pradesh, and Telangana, require employers to pay compensation without deductions. Also, the Ministry of Labor and Employment issued a recommendation (“MLE Recommendation”) to all private employers on 20 March 2020. The facility is non-operational, where core activities cannot be performed remotely and include all shops, commercial facilities, and manufacturing departments engaged in non-essential merchandise. It also states that employees who take leave during lockdown must be considered on duty without wage deductions. Similarly, the Chief Cabinet Secretary issued a recommendation (“CG Recommendation”) to the state government on March 22, 2020, demanding that the state government provide compensation to employers during the lockdown. In light of these, there is no legal obligation in India for employers to pay during the lockdown. Therefore, the employer is not obliged to pay employees who refuse WFH, unless restricted under state order. Such specific cases can be handled by company policy and applicable laws regarding leave, loss of salary and disciplinary action. Nevertheless, if the employer is non-operating and the reason cannot be attributed to the employee, it is advisable to pay as if the employee was on duty.

Employee Perspective:

What is a layoff? Is it different from suspension?

Layoff means termination of employment by the employer or management (with or without notice). Layoffs are not due to the negligence of employees, but due to lack of work, cash, or supplies. Permanent termination is called termination. However, given the Labour Dispute Act of 1947 (India), layoff means layoff of an employee due to lack of input or lack of input related to productivity, mechanical failure, or the effects of natural disasters. To do so. The dismissal of employees does not mean that they have left the job, and if the situation improves, such employees can return to work. Layoffs apply to workers and suspensions apply to all other employees of the company, including managers.

Is it mandatory for employers to pay their employees during a lockdown even when it is not possible to continue job responsibilities in a lockdown?

Employees may not be able to perform their jobs for two reasons: Illness-self or family or, due to the nature of work not supported at home. Due to illness-self or family: There are various possibilities to participate: First if an employee is ill, sick leave will be applied by statutory store and establishment laws in each state. Second, if an employee is tested but not positive, he/she can use sick leave to recover from the illness. Moreover, if an employee is tested positive for COVID-19 after returning from an official trip, the organization is obliged to provide 28 days of paid leave for quarantine and full recovery. However, organizations are not required to provide paid leave for recovery, except in Karnataka, if an employee tests positive for COVID-19 after a personal trip. If an employee needs to take a leave to care for a sick family diagnosed with COVID-19 positives, the employee will carry out a self-isolation for 28 days and apply for the leave for yearly leave. 

In light of these, there is no pan-India legal mandate for employers to pay during the lockdown. Thus, employers are not obligated to pay employees who refuse to WFH, provided there is no restriction under state orders. Such specific cases can be dealt with in accordance with company’s policies and applicable law on leaves, loss of pay and disciplinary action. Nonetheless, where the employer is non-operational and no reason can be attributed to the employee, it is advisable to pay as if the employee is on-duty.

What if my employer has to dismiss some staff? Is layoff legal in India?

As specified in the previous section, layoff or reduction is a process defined in India. It is subject to the terms of the employment contract and certain laws under state law and may apply to certain sectors/industries. There is also the notion of a “retirement allowance” that has no legal basis. However, it is a rule to reduce employee distress. Again, it’s a good idea to make staff transparent across all levels, to understand the distress/business situation, and to find solutions that are as friendly as possible.

Can Indian employers suspend their employees temporarily without pay?

If you do not have explicit contract rights to terminate your contract in these circumstances, there is no clear way to terminate your employment. Imposing a forced suspension without your consent may result in claims to your employer and you must seek your consent.

What are the options for full-time employees who may be laid-off?

Instead of being dismissed, full-time employees can choose one of three options:

  1. The entire state within departments, classes, and options can be moved to a position held by the youngest and least employee.
  2. You may be allowed to voluntarily demote to another position in the next lower level class of the current Class Series within your department and geographical location.
    1. Layoff and displacement are by department
    2. Employees cannot transfer employees of another department
    3. Senior class employees cannot replace lower class employees with higher seniority
    4. Employees must meet minimum qualifications for classes and options
    5. Always downward movement
    6. Full-time and part-time should be treated separately
  3. If no one in the current class series has poor seniority, employees can return to their latest previous class.

If an employee has COVID-19, what are the implications?

Any employee who had exposure or may have symptoms or has contracted COVID-19 should be prevented from working at the employer’s premises in order to protect the health and safety of other employees. Employers must strongly recommend the employee to self-quarantine and isolate at home, circulate a suo moto report as required under state-specific orders and access healthcare services immediately. With respect to the employer’s liability for compensation or bearing medical expenses, it will be important to determine if the transmission occurred at workplace where the employer will be solely liable. For other situations where transmission has been in relation to employment, there is ample subjectivity and it will be difficult to substantiate and prove such claims.

Crashing economies, plummeting sales figures coupled with the uncertainty of business redemption is prompting many companies to terminate employment so as to save themselves from running out of business! Employees scarred by the unemployment in the wake of this crisis are asking themselves, “What now?” Job loss can be a disturbing, and difficult time – psychologically and financially – particularly with so many unknowns in our world right now. But professionals terminated by their employers must be abreast with the key developments introduced by the government, as in the case of Karnataka, and navigate the upcoming chapter in their career with confidence! The key to navigating the rough waters of COVID-19 is to remember that this is temporary and we are in this together!

Sonam Chandwani

Sonam Chandwani

Sonam Chandwani is the Managing Partner at KS Legal & associates and heads the firm’s Corporate Litigation Practice.

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