By Samheeta Rao, Anchal Kakkar
As the social sector comes to terms with the impact of the pandemic on funding, leading to necessary pivots, a lot of organisations and employees are grappling with questions and concerns related to laws and regulations concerning employment, amongst others.
Samheeta Rao, Partner, GameChanger Law Advisors began the session by walking the audience through the framework of Indian labour laws, types of arrangements to engage human capital, minimum wage requirements, social security regulations and other workplace-related legislations such as anti-discrimination laws and firing (notice period requirement, statutory severance and post-termination obligations). In addition, she also briefly summarized some of the orders issued by the governments in the wake of the Covid-19 pandemic.
Post this introduction, Satyam Vyas, Founder & CEO, Arthan asked Samheeta questions that have been concerning the social sector (collected through Arthan’s conversations with various organisations as well as suggestions participants had shared prior to the session).
Here, we have provided a summary of the conversation between Satyam and Samheeta.
Q. What are the legal implications that are brought over an organisation (an NGO registered under the Societies Act) for laying off employees/contractual consultants during the COVID-19 crisis?
Ans. There are two parts to this. Laying off is different for full time as compared to contractual employees. Every entity should carefully consider the employee, his/her context before letting them go. If an organisation has to let go of a fulltime employee, contracts and termination clauses must be looked at – typically, the notice period is for 30 days and the full & final settlement must be done, which could include paid leaves, salaries, etc. The organisation can also consider giving a severance package, though it is not a statutory requirement. To let go of a contractual employee whose contract is coming to an end, review the end date of these contracts. If a contract is coming to an end, don’t renew the contract. If not, review the termination clause and issue a notice of termination. It is important to be humane and thoughtful, especially in such times while considering the impact on the business.
Q. What are the legal/ethical actions that can be taken by the employees/contractual consultants to undo the decision/reach for a settlement who have faced the above action by the organisation during the COVID-19 crisis?
Ans. Grant money is drying up in a lot of places as CSR money is being redirected and there is not a lot of work to provide to employees of NGOs. But there might be sole earners in your staff who rely on this salary. From a legal point of view, an employee can only challenge the decision on the procedural requirements i.e. if someone has not been given a notice period. But it puts the employer on the offensive so it is not a great position to be – for both the employee and employer. Employers should be careful of the reputational risk as employees might take to social media putting the employer at real risk. So employers must remember to be careful. Additionally, having an NGO as a litigant in a court could also affect future diligence/background checks that corporates conduct on NGOs prior to giving grant money to the NGO.
Q. What is the impact on employment contracts – necessary to include clauses for a similar future occurrence and to protect employee rights?
Ans. There can be a regulation on minimum wages. But organisations cannot be in a situation where there is a contractual guarantee of never firing. The government will need to step in, if there is a similar situation as today, either through wage subsidies or other direct government support to employers. As of now, from PM Cares or the disaster relief fund, there is nothing for the impact sector. There will be a 30-60% dip in grant money coming from CSRs etc. Therefore it will be important for the government to give direct support and provide wage subsidies and the like.
One must remember that in the employment relationship, there is an unequal bargaining power – the organisation has more power in any case. Currently, we do not have a NASSCOM or a FICCI equivalent for the impact sector, and we must create one to fight for those rights. Neither is there an equivalent of a trade union in the impact sector, where there can be collective bargaining, to correct the unequal power relationship in employment negotiations.
Q. What are the legal changes that can be made to retain more employees instead of having to let them go?
Ans. One can look at creating job share arrangements – where two people, who were doing the same or similar work enter a job share where both of them ensure the output of one, taking a pay cut. This is good for employers as well as they get the skill sets of two people at the cost of one. This is fairly common and a well-tested arrangement globally.
Then organisations can also look at salary restructuring – by altering the variable component where all people take less now but share the profits when it gets better. This works when the team is small and family-like. Another option is reducing a certain percentage of the salary – many are doing it, starting at the senior level. Employees can also look at availing the facility from the EPFO to withdraw a non-refundable advance where employees get 3 months of PF as a non-refundable advance. Another option is to move to a longer payment cycle – quarterly, or bi-monthly. This gives more liquidity to the organisation. The organisation will have to convince employees by telling them that at least they are not getting fired.
Q. Would notice period requirement be driven by law or by the terms of the employment contract for supervisory staff?
Ans. The notice period will be determined through the employment contract as not many states regulate the supervisory staff. However, who is a supervisory staff is to be determined by their work and not the designation.
Q. Can pre-existing term defined employment contracts be closed during this time?
Ans. All contracts can be terminated as per the terms. There could be some penalty for terminating early. Some contracts might have a lock-in period as well, though rare.
Q. Can performance-based terminations (after following due process of PIP and warnings) be done during COVID lockdown?
Ans. Definitely. Misconduct or performance-based terminations can be done. One just needs to be careful about the procedure. Do not make the mistake of not issuing a show-cause notice, or having an only verbal conversation and not having a record of non-performance etc. All such mistakes can be challenged in court and may result in an adverse decision against the employer.
Q. Would like to check how we can let employees go due to cost-cutting. Also, it is clearly mentioned in the employment agreement for one month notice?
Ans. Always follow the procedure. Determine the business case and select the employees to fire. From that, do a case by case analysis as you would want to avoid firing marginalised employees, people on maternity leaves, or those with an ongoing POSH case – as these can lead to legal consequences, such as a claim that the dismissal was retaliation for raising a complaint, or was discriminatory.
Q. Can an employee go to labour court for reduced wages?
Ans. There is an industrial disputes act for industrial workers, but not for NGOs. For such a situation, the case will go to a regular civil court.
Q. Can we forfeit gratuity if employees are damaging the org?
Ans. Only in specific cases, where there is damage to property etc, can you reduce gratuity by the value of the damage.
Q. How can an organisation implement a voluntary pay cut program?
Ans. Something like this needs to be culturally driven. Just like VRS schemes exist, something on similar lines can be created.
Q. If an organisation had issued an offer and specified date of joining – all before the lockdown – but now wants to not hire the person as positions are being removed or reduced, does the person have the right to take legal action against the organisation?
Ans. An organisation can withdraw offers that have been accepted by the candidate. Ensure that you are vocal about your decisions on not hiring – can be communicated through announcements on your website/pages. If possible, to the candidate whose offer has been rescinded, salary equivalent to a month or a couple of weeks can be paid as a goodwill gesture, especially where the joining date is imminent.
Q. How can one go about legally restructuring employee contracts keeping in mind the change in the mode of work (work from home/remote location work/work online) due to the pandemic?
Ans. The entire contract does not need restructuring if there is enough flexibility in the current contract. Some of the things that might be needed are changes of policies around IT or code of conduct if the scope for sharing confidential information is high. Organisations that can afford can use screen surveillance software if needed.
Q. In case if the organization chooses to reopen the workplace, can an employee be penalized for choosing to not to come in, keeping in mind personal risks (family risks)?
Ans. The organisation should be extremely careful in ensuring that the workplace is extremely safe. If something happens to an employee, the organisation will have to bear the cost. Therefore, organisations must do a risk assessment before asking employees to work from offices. Also, organisations must keep in mind the mode of travel of their employees before demanding presence in the offices. If the employees are able to maintain their efficiencies from home, then probably asking for their presence in the office may not be needed. However, if absolutely necessary, an organisation can demand the employee’s presence (after ensuring all safety measures are taken).
Q. If an employee does not accept the F&F, in that case, does the organisation have the right to deposit the amount in the employee account without his consent?
Ans. This is not an unusual scenario. Organisations have the employee’s bank account details and may deposit the amount. The employee may accept it without prejudice – which means that he/she still reserves the right to challenge it. This would be a precursor to a formal challenge.
Q. Can organisations share information or communicate about a COVID-19 positive case? And create COVID-19 specific policies?
Ans. While patient privacy is important, it becomes difficult in the case of easily transmitted diseases. The organisation has the obligation to inform government authorities and those in contact with the patient. And following the Covid-19 standard operating procedures, organisations will need to have policies wrt sanitisation, installing surveillance devices at workplaces to ensure social distancing is being maintained, and having nodal officers review the CCTV footage, coordinating with the government. Policies around space between desks, office layouts, etc might also be included. Medical insurance will also become a more prominent ask by the employees and is something organisations will need to consider.
There is no dearth of questions around the laws and regulations that currently exist and might do in the future from the perspective of the pandemic. In the end, Samheeta left us with some parting thoughts – she spoke about the message that Airbnb’s CEO shared, which according to her was a transparent and a thoughtfully crafted message and urged all present to go through it.
There is a huge need to talk about and make organisations and employees aware of the rules and regulations that exist and for them to know about their rights and responsibilities. We hope to be back with another session that specifically addresses mergers and acquisitions for organisations in the impact sector.
Watch the full video of the session here.