Can small private employers, faced with mounting losses and no revenue be asked to continue paying salaries of workers during the lockdown, indefinitely? This question has been raised in the Supreme Court by a Ludhiana based association of hand tools manufacturers, comprising of 41 MSMEs.
On March 29, the Ministry of Home Affairs (MHA) had passed an order, under Section 10(2)(I) of the Disaster Management Act (DMA), directing “all employers” to pay wages to their workers, without any deduction, for the period of the lockdown. The same order had warned that noncompliance would lead to necessary action under the DMA Act.
The plea by the MSME association seeks to quash the MHA order directing payment of full salaries.
The plea in SC argues that when the economy is in lockdown and business revenue is at zero, it was becoming impossible for employers to continue making payments to workers. The petition also warned that making such payments will lead to the closure of many MSME units, which in turn will cause permanent unemployment and will adversely affect the economy.
The plea also red-flagged how the “Provident Fund Department” has several thousand crores in unclaimed Provident Fund Deposits. The plea argued that if the intent of the govt was to protect the interest of workers, then the govt should employ thee funds and not burden the private sector.
The plea submits that the MHA passed orders without due care and deliberation on the financial implications for the employers.
The petition by MSMEs also urges that Centre lacks the powers to direct private establishments to pay full wages irrespective of work done. Such a blanket direction for payment of full salaries is manifestly arbitrary, unconstitutional and unsustainable, argued the plea.
Petitioners are likely to argue that it is irrational to treat all private establishments alike irrespective of profit, loss, debt, or turnover. The plea submits that a blanket direction by MHA is akin to a tax without any statutory backing.