Can an employer refuse to pay his employees’ wages during the ‘lockdown’?

The answer is ‘No’. This ‘lockdown’ is temporary. The employer’s obligation to pay continues – unless the ‘lockdown’ lasts for a long time. In that case, the legal obligation to pay ends: but do not panic, that point has not been reached. If it is reached, again, don’t panic, The Government cannot leave more than 10.25 million employees in the lurch.

A Short answer: ‘No’

In my opinion, and that of my colleague, VK Raj, a labour lawyer, the answer is a firm ‘No’.  [I can claim no credit for the contents of this article: that belongs to VK Raj.]

The employment of an employee who has been – through no fault of his own – forced to stay at home is only ‘suspended’, not ‘terminated’.

His employment continues.

His contract of employment is neither ‘terminated ‘nor ‘frustrated’.

And so the employee has to be paid his wages – for the moment.

Why?

I had previously argued here that the coronavirus ‘lockdown’ is only a ‘suspension’ of work and not a termination.

What is the meaning of the word ‘suspend’ in the ‘coronavirus lockdown’ context?

‘Suspension’ means, in this context,

‘to temporarily keep (a person) from performing a function, occupying an office, holding a job, or exercising a right or privilege’.

That differs from ‘permanent severance’.

What is the legal status of an employee whose duties have been ‘suspended’?

Two Indian cases answer it.  In both cases, the men had been suspended from work. The question arose whether the employers could refuse their salaries.

Dandapani is suspended, and asks for his wages

The first case is an old one. It went back to 1954.1In Dandapani Gouda v. The State of Orissa [1953] AIR 329, Panigrahi C.J. ruled at p. 331 of the Report at column 10

His employers suspended Dandapani.

Was his contract of employment still alive?

Was his employer obligated to pay his wages?

The Indian High Court answered ‘Yes’:

‘There is a difference between ‘reduction in rank’ and ‘suspension’. Suspension literally means ‘the act of debarring’ for a time from a function or privilege’. It means a temporary deprivation of one’s office or position. The suspended officer does not cease to be [an employee]; he is only prevented from discharging the duties of his office for the time being’.2 In the context of that case, the employee was a ‘public servant’. So, in this sentence, the court used the phrase ‘public servant’. I have replaced it with the word ‘employee’ without loss of meaning – to show that one can come to an identical legal conclusion.

The court concluded:3Idid, towards the end of Column 11

‘It is clear therefore that the [employee] did not cease to be an officer of the Department of Registration and that his responsibilities continued as [employee], even when he was under suspension’.4I have used the same principle of substitution, inserting, ‘employee’ for the word ‘public servant’.

Krishnaveni Roadways, in Madras, refuses to pay wages to Mr. Punnaivanam, a suspended worker

About four decades later, the Madras High Court case dealt with a similar argument.

A company called ‘Krishnaveni Roadways’ refused to pay its employee – Punnaivanam –  his wages. He had also been suspended.

Was his employer obliged to pay his wages during his suspension? The High Court ruled, ‘Yes’.5The Management, Krishnaveni Roadways, Madurai v. I.P. Punnaivanam & Another [1991] II LLJ 137, His Lordship Mr. Justice Srinivasan held at p. 137 of the Report.

The court said:

[Even] after the suspension, the relationship of employer and employee does not come to an end and the employer was bound to pay wages during the period of suspension.’

The court explained the legal relationship between the parties.

‘It is an elementary principle of law that an order of suspension does not sever the jural relationship of employer and employee between the management and the worker’.6 At p. 138 of the report

So, what about the concept of ‘frustration’? Does that not help the employer?

The legal concept of ‘frustration’ releases both employer and employee. That has been done here.

But a ‘suspension’ of the employee does not create a legal event of ‘frustration’.

As I have argued here, that for frustration to work, three factors need to be present:

(1) Some ‘Supervening Event’ must occur.

(2). The Event must be something that both parties had not thought about – at the time they entered into the contract: called ‘unforeseeability’.

(3) The effect of the Supervening Event must be to ‘completely change the foundation of the contract.’

The Movement Control Order is temporary – that is not  legal ‘frustration

The ‘lockdown’ may last two weeks or a month.

It is a ‘temporary’ phenomenon. The Covid-19 pandemic does not change the kind of work of, e.g., a construction worker does – it only makes it temporarily impossible.

It is not in law, a ‘Supervening Event’ that ‘completely changes the foundation of the contract.’7See section 52 of the Contracts Act 1950; and also, sections 15 to 18 of the Civil Law Act 1956

If the ‘lockdown’ lasts much longer – what then?

Then it would be unfair to expect the employer to pay the employee.  Then, in my view, the ‘supervening Event’ –meaning the lockdown as a result of the coronavirus – can amount to ‘frustration’ and the obligation to pay wages of the unproductive employee may cease.

But that is a long way away, for the moment.

So employees should not panic. Relax.

Even if the lockdown lasts much longer, and the employer cannot bear this financial burden, the Government should step in and help all employees, as I have argued here.

So how now? To pay or not to pay?

As most employees’ work has been suspended by the ‘temporary’ coronavirus ‘Movement Control Order’, the employer must still pay his wages.

 

[I acknowledge the help of my learned brother, Mr. VK Raj, to whom much gratitude is due]

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