The aftermath of COVID-19 in India: Employment law has assumed greater importance than ever before

Jun 1, 2020

India is the fifth-largest economy in the world with a workforce of 400 million. Several companies across the world have wholly-owned subsidiaries in India, mainly in sectors like IT and IT-enabled services, financial services, consulting, insurance and healthcare. A large number of multinational companies depend on their Indian subsidiaries and group companies for back-office support. In a very short time, the Covid-19 pandemic has changed the global perception of doing business and managing employees. The imposition of a national lockdown in India since March 24, 2020 (which continues until date) has posed unusual challenges to employers, as for example, adopting stringent measures (like furloughing or paying reduced wages to employees and facilitating social distancing norms at the workplace).

The Indian government has issued several employment law advisories and orders, primarily pertaining to the continued payment of wages and restricting termination of employees, in the wake of the pandemic. While the Indian economy is slowly resuming operations, there is an obvious urgency among employers to adopt and implement the new regime (or as often called the “new normal”) and to survive in the post-Covid world.

Evolving employment law landscape and the MHA Notification

Over the course of the past couple of months, various central and state governments have issued numerous notifications on employment laws. Among these, the most pertinent one is the order issued by the Ministry of Home Affairs on March 29, 2020 (the “MHA Notification”) under the Disaster Management Act, 2005. The MHA Notification directed the states and Union Territories to, inter alia, take measures to ensure that, during the lockdown, employers pay wages to their employees timely without any deductions. Several states (such as Maharashtra and Tamil Nadu) have also passed similar orders. The MHA Notification has been challenged before India’s Supreme Court, as many employers have been struggling to keep their businesses afloat and are unable to pay their employees. The matter is currently sub-judice, and the Supreme Court has stayed the MHA Notification during the pendency of the petition. Therefore, as on date, an employer is not restricted from reducing wages or terminating employees as per applicable law; however, whether this applies to the period during which the MHA Notification was in operation is still open.

Additionally, some states have issued notifications on various other aspects, such as relaxations for filing annual returns, reductions in contributions to the Employees’ Provident Fund and extension of hours of work in factories, shops and establishments.

The UP Ordinance

The state of Uttar Pradesh is in the process of promulgating the Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020 (the “UP Ordinance”) that will suspend the operation of all labour laws applicable to factories and manufacturing establishments in that state for a period of three (3) years, with the exception of the Bonded Labour System (Abolition) Act, 1976, Employees’ Compensation Act, 1923, provisions pertaining to safety under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 and the Factories Act, 1948, provisions pertaining to the timely payment of wages under the Payment of Wages Act, 1936, minimum rates of wages notified by the state government and provisions in the labour laws relating to women and children. The state government has propagated that the UP Ordinance will act as an incentive for investing in the state of Uttar Pradesh and will ease compliances on employers. However, the UP Ordinance has elicited resistance from national and regional trade unions and the legal fraternity at large as being anti-employee. Hence, for now, it is difficult to predict the fate of the UP Ordinance.

Work from home is the new normal

Although a lot of work in the services sector happens remotely, most organizations are structured to function in a physical workplace. However, with the commencement of the lockdown, employers have been forced to explore the work from home model, and this may continue even after the lockdown is lifted in India, more particularly in the areas identified as “red zone”.

Currently, depending on the geographical location, the government has permitted a fraction of the entire workforce of an organization to work at any given time. Further, employers will have to follow and implement strict protocols to monitor the health of employees and to ensure that employees maintain social distancing at the workplace. In fact, employers may find it easier to have a majority of their employees working from home, because it may be difficult to adhere to the government’s norms in densely populated Indian cities.

Several employers, especially in the IT sector, already had the required infrastructure for working remotely, and as per news reports, the IT industry has realized that they can function and operate smoothly with their employees working from home on a long term basis. This may also be a more cost-effective model for some industries and professions, as it can lower the need for workplace infrastructure and overhead costs. From an employee’s standpoint, this will lead to a better work-life balance, and reduce time and cost of travelling to work, as also avoid the risk of catching the Coronavirus in the course of travel.

Currently, none of India’s employment laws specifically deal with a work from home scenario. Given this, employers will have to take into consideration how they can adhere to legal requirements, such as working hours, overtime work, leave management and employee safety, when employees are working from home. Employers will also have to ensure that they have secure systems in place to safeguard confidentiality and data privacy. It may be best to formulate a work from home policy by specifying an inclusive set of rules, guidelines, protocols and best practices. More importantly, companies will have to evolve into more mature and deliverables-based organizations, as opposed to being micro-managed offices.

The way forward

The Covid-19 pandemic has led to unprecedented economic and social impacts across industries, and the uncertainty will continue for some more months until an effective vaccine is found and mass-produced.

Historically, India has always been a pro-employee jurisdiction, but with the proposed changes, such as the UP Ordinance and the extension of working hours in several states, the government seems to be moving towards a pro-employer set-up, primarily to boost the weakening economy.

Most of India’s employment laws are archaic, and the government has been in the process of restructuring the legal framework in the past few years into four (4) labour law codes. However, the substantive aspects of these labour law codes are similar to the existing laws (See our update on new labour codes here). This may be a good time to revisit all of India’s employment laws in view of the learnings derived during the lockdown and introduce fundamental changes, which will ease compliances for the employers and at the same time protect the rights of employees. The government should also assess the impact and implementation of employment laws in respect to virtual workplaces and work from home models, which will become the new normal in the months and years to come. India should use this opportunity to bring about much needed socio-economic changes through labour reforms without mixing this up in political agendas.

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