House panel opposes lay-off payment for workers during natural calamities

At a time when the novel coronavirus has led to a big disruption in the economic activities due to a national lockdown, a Parliament Standing Committee (PSC) has asked the government to re-visit a clause in labour laws which allow workers to get lay-off compensation in case businesses are disrupted by a ‘natural calamity’.
 

The Standing Committee has suggested that the government allow bigger companies to retrench workers, without the need to seek official nod from the government and asked the government to put a cap on the number of times firms can renew contract of workers. It has further struck down a proposal from the government for workers to give a 14-days notice before going on a strike across all the sectors of the economy.
 

“…In case of natural calamities like earthquakes, floods, super cyclones etc. which often result in closure of establishments for a considerably longer period without the employer's fault, payment of wages to the workers (towards lay-off compensation) until the re-establishment of the industry may be unjustifiable,” the Parliament Standing Committee on Labour, led by Biju Janata Dal Member of Parliament Bhartruhari Mahtab, said in its report on the government’s proposed Code on Industrial Relations Bill, made public on Friday.

This assumes significance, particularly in the current scenario when companies, which are struggling to make ends meet, are unable to provide wages to their workers in many cases. After the national lockdown was enforced on March 25, businesses, except those involved in production or services of essential items, shut shop across the country.

The National Democratic Alliance (NDA) government urged employers not to lay-off or retrench workers during the lockdown which was led by a strict follow-up of the advisories from the labour commissioners. In fact, the government issued an order on March 29 directing companies not to deduct or reduce wages of workers during the lockdown period - a move that has been challenged by some employers in the Supreme Court.
 

While the government hasn’t declared the Covid-19 pandemic as a ‘natural calamity’, a labour law expert said the Finance Ministry’s order in February, permitting companies to revoke ‘force majeure’ clause for natural calamity, is a big signal that the pandemic can be treated as a 'natural calamity'.
 

In labour law parlance, there is a slight difference between lay-off and retrenchment. Lay-off is temporary in nature, when workers cannot be given work for a temporary period of time, as against retrenchment. Lay-off can be for multiple reasons. For instance, shortage of coal, power or raw materials, break-down of machinery or natural calamity – factors usually beyond the control of workers – under the present law.

In India, the Industrial Disputes Act, 1947 governs the provisions for lay-offs which itself is restricted to only registered plantation, mines and factories – exempting services and construction sector, among others from within its ambit.

Further, the lay-off compensation is given only in case the size of a firm is 50 or more in terms of the workforce. A worker, who is on the muster roll of a company and has completed 240 days of ‘continuous service, is eligible to get 50 per cent of wages for 45 days as lay-off compensation, under the present law.
 

Though the Union Labour and Employment Ministry defended the ‘natural calamity’ clause, the Standing Committee didn’t accept their contention. CPI (M) Rajya Sabha member Elamaram Kareem, who is also a member on the panel, gave a note of dissent to this.

“I am not concurring to this proposal and opposing lock, stock and barrel and recording my strong dissent. In fact, the present coronavirus situations have compelled us to strengthen this legal area which is awfully inadequate in our labour legislations,” he said. He even said that the given situation warrants the need to expand the definition of natural calamity to include pandemics and epidemics in the proposed law for the lay-off clause.
 

Regarding the strike, the committee has said that it found “no plausible reason” for expanding the ambit of strike notice to all industries. Under the present law, workers in only establishments involved in public utility services, such as banking or aviation, are required to give a notice of 14 days before going on a strike. The government had proposed to expand this to all the industries but the committee didn’t agree.

It has also said that the registration of trade unions should be done in a timely manner. They should get a response to their application made to the authorities within 45 days – long-standing demand of the unions, according to the committee.
 

The committee has asked the government to allow factories with up to 300 workers to retrench, lay off or shut shop without seeking the government’s nod in the Industrial Relations Bill proposed in 2015. At present, factories with up to 100 workers can do so. While the government had kept the same threshold in the proposed law but it had given itself executive power to make the changes without going through the Parliament – a suggestion not agreed to by the committee.
 

Since labour is a concurrent subject, where the States can make its own laws, Rajasthan, Madhya Pradesh, Andhra Pradesh, Haryana, Assam, Uttar Pradesh, Jharkhand, among others had already allowed companies employing up to 300 workers to retrench without official sanctions.
 

What the Parliament Standing Committee has suggested:
 

*Increase threshold for companies to retrench without permission to 300 workers from 100 workers
 

*Remove provision for workers to go on strike with a notice of 14 days across all sectors; keep it for public utilities
 

*Approve or dismiss an application for registration of trade unions in 45 days
 

*Put a cap on number of times fixed-term contracts can be renewed to make it foolproof
 

*Fixed-term contract employees to be eligible for gratuity after 1 year of completion of service